REO: Buyer Beware
REO properties (Real Estate Owned) are generally held by the lender and are serviced by an asset manager, typically out of the state. There are a number of things to consider when purchasing an REO property. Blindly purchasing a REO simply because the price looks good can get some buyers into trouble. Here are a few things to keep in mind:
1. Most asset managers or lenders do not know that actual condition of the property. They have no idea if the pipes have burst and the basement has 1’ of standing water.
2. REO transactions are “AS-IS” sales and the REO seller usually uses their own REO addendum. If the REO seller is out of state your agent cannot interpret this document for you as a buyer. You need an attorney. It is the law.
3. Most REO sellers will negotiate verbally with you as the buyer. Only written contracts are enforceable. If the REO seller receives a better offer you will most likely be out.
4. Many REO sellers use out of state title companies, which may not be familiar, our laws. This can present a real problem with conveyance if the title company is taking short cuts to save money on the policy.
The bottom line when purchasing a REO property is that first you should be working with an experienced agent who understands the pitfalls and second you will most likely need to engage legal counsel to help navigate the paperwork.
Posted by: 
Glenn Hanon
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