If you’re buying a home, you might be considering going the foreclosure or REO (real estate owned) route. Both are types of bank-owned properties, but there’s a big difference in the purchase process. When a home is in foreclosure, it means the bank has repossessed the property and put it up for auction. At the auction, bidders purchase the house on the spot. If the auction is unsuccessful, then the house gets put on the market as an REO home, which is sold similarly to an owner-owned property.
While you can get a great deal in Austin by purchasing a bank-owned home, be prepared to be patient, well-informed, and diligent.
Tips for buying an REO home
Buying a foreclosed house at auction is usually not the best bet for unseasoned homebuyers. The buyer will start at a minimum bid (usually the amount left on the loan) and then be prepared to present a cashier’s check with the amount of the winning bid. This route is suitable for real estate investors, flippers, and those who want to purchase rental properties (sometimes the owner still lives in the home and they can rent it out from you).
As a residential homebuyer, you’re most likely going to go the route of purchasing an REO home. This type of sale is handled by an agent, and you work with the lender (usually a bank) directly. It can take a long time to get to closing, maybe six months to a year, but there are some serious financial advantages.
Here at the Austin Summit Group, we handle the sale of REO homes. Our agents can offer you useful suggestions, such as:
- Do your research. If you’re set on purchasing a foreclosed home, limit your initial searches to just REO homes. Once you know what those houses are going for, look at what private homes are selling for and compare the difference. See if it’s worth it. Make sure you perform a thorough market analysis and understand the neighborhood as well.
- Get preapproved. Before considering purchasing any house, get preapproved by a mortgage lender. That tells the bank you are serious and you will be able to carry a mortgage.
- Hire an agent experienced with REO homes. Pick an agent who understands how to work with the banks, get the right contracts, and represent your best interests.
- Be prepared to negotiate. REO homes can be a great deal. You can find a house for far below market value, might be able to make a very small down payment, and might qualify for a very competitive interest rate on your mortgage. Remember—you’re dealing directly with a bank. Use that to your advantage and negotiate the best deal possible with the help of your agent.
Buy a foreclosure in Austin
To find REO homes in Austin, visit our Foreclosures page. At the Austin Summit Group, we help you identify bank-owned properties and narrow your search to the areas you’re interested in. To learn more, call us today at (512) 250-0253.