Buying an REO Home: Four Things You Need to Know
With mortgage interest rates at record lows and single-family home affordability at an all-time high, there has never been a better time to buy. In the wake of the recent housing crisis, it's increasingly common for prospective homebuyers to consider buying a real estate owned (REO) home – one that has gone through the foreclosure process and is owned by a bank or other institution. While the process for buying an REO is a lot like buying any other home, it's important to understand what you should know before you buy.
Tips for Buying a HomeSteps® Home
- Act quickly once you’ve found the right home
- Submit your best offer as your initial offer
- Turn in all required items:
- Sales contract
- Pre-approval letter
- Proof of funds for cash sales
- Earnest money check
- Necessary addendums
- Make sure your real estate agent understands our “Multiple Offer Process” guidelines
On Average, Complete Offers Are Accepted or Countered in Four to Five Days
Find a reputable agent who knows the market. Your strongest offer will be one that is comparable with other sales and listings in the neighborhood. Rely on a licensed real estate agent who is active in the neighborhoods you are considering – it's even better if they have an office nearby. While banks and institutions can and will negotiate, they typically employ local pricing strategies with the goal of selling their homes at or near current fair market value. At HomeSteps®, most of our homes sell for close to full estimated market value – an average of 95 percent last year. A good real estate agent can help you find a well-priced home that you can afford.
Secure financing. If you know you'll need a mortgage to buy, it's a good idea to get pre-approved by your mortgage lender. You should also know the maximum sales price that you can afford before you fall in love with your dream REO home. Also, make sure you have enough cash on hand for your down payment, closing costs, and potential renovation/repairs. While most banks and institutions make necessary repairs, you are still buying a home “as is” and you may need to consider additional costs.
Be ready. If you see a home that you'd like to buy, the sooner you can make the offer the better. In many cases, you will likely be competing against investors and other interested parties and some are able to move fast, often with cash offers. Last year, HomeSteps® homes sold in less than two and a half months.
Do your homework. Most REO homes are sold “as is” so it's important to do your due diligence once you've signed the contract. Start with a home inspection. While it's always a good idea to get an inspection when you're buying any home, it's even more critical when buying an REO home since it may have been vacant for some time – maybe years! You may also want to take the opportunity to ensure that the home does not contain any safety hazards or other unknown issues. Talk to your real estate agent about any additional inspections or testing that may be appropriate for the home you're interested in buying. Remember, you can always cancel the contract if you discover inspection issues.
You may want to begin your home search at HomeSteps®, the real estate sales unit of Freddie Mac. We have thousands of desirable and affordable homes available across the country.
There are several advantages to buying one of our homes. First is the condition of our homes, which are clean and well maintained. Many of our homes have been repaired and are move-in ready. This is thanks to our Good Neighbor practices that ensure that within three business days of a confirmed vacancy, each home is secured, preserved, and cleaned. Our agent continues to diligently monitor and look after the home throughout the marketing process. Second, our network of licensed brokers and real estate professionals have deep experience in selling REO homes and are trained on our policies and programs so they are equipped to help you. Finally, we offer special buyer incentives like an allowance for a home warranty and buyer's closing costs assistance. Click on one of the links below to get started.
Resources for Buying Freddie Mac-owned Homes
- Search for homes by city, price, state, or number of bedrooms.
- Find out about our special offers, including the First Look Initiative.
- Learn about HomeSteps® Financing options.
- Follow us on Facebook at http://www.facebook.com/homesteps.
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