Working with lender's real estate owned (REO) department?

March 25, 2008 12:30 PM

Does anyone have any insight or experience into dealing with lender REO Departments (Real Estate Owned) when it comes to purchasing a foreclosed property? My wife and I are interested in purchasing our next primary residence from the bank prior to any sort of auction.

Essentially, I'm wondering if we can put in an "order" of sorts with the bank and have them contact us should something that meets our criteria become available. However, I'm not familiar enough with lender REO procedures to know if this is even a possibility, much less if we really stand to find a great deal in this manner. Are they willing to unload foreclosed property efficiently if they have approved buyers waiting in the wings?

posted by BirdD0g to Home & Garden (5 answers total)

A recent development of the sub-prime Mortgage market is a number of properties are available. Some however have been selling before foreclosure is complete. So be sure that the property you are interested in is actually foreclosed and hopefully vacated by the previous owners. There was an auction in Boston, MA recently that ended up with a good percentage of sales taking months to close, some because the bank did not have clear title.
posted by Gungho at 1:16 PM on March 25, 2008

Another thing to consider is that if the person who owned the home before it was foreclosed couldn't or wouldn't afford the house, it's likely and probable that they couldn't or wouldn't afford the maintenance either.

And, in some cases it may be impossible to inspect the house before closing.

My wife and I looked at several foreclosures in our area (downtown and near east side), but we were not at all impressed with the condition any of them were in. They were in substantially worse shape than the other homes in the price range, and I cannot imagine that the bank is going to be selling them soon.

I don't know how typical that is, but that is my recent experience in the Madison WI area. (we found a really cute house on a huge lot near East High. We close in a week.)
posted by Pogo_Fuzzybutt at 1:25 PM on March 25, 2008

My experiences with REO departments suggest that you will not be placed on a waiting list for properties that meet certain criteria. These departments are so backed up and tied up with red tape that even if such a list existed, I doubt it would be of much use to you.

If I wanted to accomplish this I would see about getting a sit down with a credit union or local bank branch manager in the area you want to buy and see what they have on the books.

Personally, I would avoid bank owned properties. People getting foreclosed on don't have money to pay their mortgage, much less maintain the property sufficiently even if they wanted to. Generally these properties are purchased on the cheap, but you end up dumping a lot of upgrade/repair money into them to make a livable home.
posted by curlyelk at 1:29 PM on March 25, 2008

Just anecdotal but you should make sure you get the place carefully inspected. An acquaintence bought a foreclosed place and has reported that the previous owners tried to wreck the plumbing before they left.
posted by Morrigan at 1:48 PM on March 25, 2008

No kidding. Also there's been a lot of trouble with these properties rapidly deteriorating after vacancy due to the work of salvagers, vandals, squatters, and occasionally a drug dealer or two.

Also, sometimes people get a little...vindictive...about being forced out of their home. Y'know: oopsie, we left the water running from every faucet.

Before you approach any banks or real estate agents, study up a bunch on buying foreclosure property.* It's its own world, and much easier to make a mistake than in the conventional market and yet look at all of the people who made mistakes there.


* Ignore any late-night informercials from Carleton Sheets and his ilk. Total ripoff
posted by nakedcodemonkey at 10:46 PM on March 25, 2008