My first step, I ask the new home builder these key questions to help my buyers approach the deal with the right expectations. New home Builder reps are more willing to answer these
How to buy a REO in Las Vegas
Dated: April 9 2021
If you’ve thoroughly prepared yourself for owning a home with a poorly documented history and a higher than normal risk of unexpected problems, as well as the stressful buying process that can go with it all, then absolutely buy the REO (also known as a “real estate owned” property or simply “REO”) if it’s right for you.
Sometimes REOs are the only way to get into the right neighborhoods or even find a home in your budget, so there are definitely reasons to pull that trigger.
Be aware that:
REO's are almost exclusively sold “as is”.
Yes, that means you get what you get, and since there’s unlikely to be a good history, it may be a lot worse than you imagine. You could get lucky and totally win the REO lottery, but remember that many repossessed properties have been sitting vacant for extended periods with little to no maintenance or human interaction, which can encourage insect and animal infestations on top of problems you’ve been made aware of.
Always get a home inspection with an REO.
In most areas you can still back out of the transaction if the condition of the home is worse than you imagined, though be aware that these inspections are limited in scope, and surprises may still be hiding. Sold “as is” means just that, though. Banks aren’t generally interested in fixing anything, so if your inspector says the A/C is bad and the roof is leaking, you’ll need to figure that into your overall cost equation.
REO's can be very competitive.
Investors often really like buying REOs, which means you’re going to be competing against other buyers who have a lot of cash on hand. Cash deals close faster and there’s less risk they’ll fail to close because of lending issues, which makes them pretty nice for a seller. A good REO is likely to be a competitive buy, so be fully prepared, fully qualified for your loan, and ready to make your highest and best offer out of the gate. You may only get one shot.
REO's can be difficult to finance.
Some REOs and lending programs are meant to go to future homeowners, but most are not especially friendly to non-investor buyers. You’ll need a substantial down payment, high credit score, solid debt to income ratio, and reliable employment for a bank to take that level of risk on a home that may become a money pit. It can absolutely be done, but this is far from a basic first time homebuyer sort of process. Loans like the FHA 203(k) can sometimes be used, as well as conventional loans, depending on the condition of the property.
REO's can be difficult to close.
If you have to borrow to buy an REO, expect the process to take months. Even if you don’t have to borrow, there are layers of red tape to cut through, because you’re dealing with a corporate owner rather than an individual. Allow plenty of time to get through all the steps of the process and be prepared to have to pivot into a different loan program if things get dicey.
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