Frequently Asked Questions About Foreclosures
Q: What does “REO” mean?
A: Real Estate Owned. It’s the term the lenders use to identify their foreclosure properties. These properties are also considered distressed properties.
Q: How is a HUD property different from any other foreclosure?
A: HUD homes are FHA-insured loan foreclosures. The government owns them. The properties are classified as “insured” or “uninsured”. Those that are insured are in good repair and FHA will insure a new loan for a new buyer for the home. Uninsured properties are typically fixer-uppers, and the buyer will be responsible for his or her own financing. Find out more on their website at www.hud.org.
Q: What are some general guidelines for your market?
A: Many of the properties that are listed require an earnest money deposit of $1,000 and are sold “as-is”. Many REO properties will sell for cash or with a variety of financing including FHA, VA and conventional financing. One should remember that many times a REO property will be in somewhat distressed condition.
Q: How are foreclosure properties identified on the MLS?
A: Certain MLS systems have a selection box on their profile form for lender owned (REO), short sale, and auction property; while others do not. As a South Central Wisconsin Multiple Listing Service member, a Bunbury & Associates Agent is able to access these types of properties.
Q: How will the lender determine the selling price? Will lenders accept less?
A: When negotiating with asset managers at a lender for the purchase of a foreclosure, they are considered professional sellers. An asset manager will work hard before a property is even listed to determine fair market value. They order appraisals and hire a broker to advise them about the property’s condition and value. Then they price them accordingly and may or may not accept less.
Q: Will the lender repair the properties that are distressed?
A: Sometimes. The asset manager in charge of the property will confer with his listing broker prior to listing it to determine if it is a good candidate for repair or rehab. He will then proceed with a marketing strategy – either “as is” or “repaired”. The as is properties are priced much lower, and the lender typically does not make repairs for these. They feel any repairs should be the responsibility of the buyer since the property’s price is already discounted.