Minneapolis Real Estate Blog

This past weekend 7/6 – 7/8 of 2007, I had the opportunity to take out 3 different buyers. All three looked at one or more corporate or bank owned properties, also known as REO’s (Real Estate Owned). These properties can be a little more challenging to deal with, but the work has the potential of being well worth it. The following are some differences between purchasing from an individual home owner and a lending corporation who has foreclosed on a property:

1. With REOs, committees typically make the decisions rather than a person.
2. Turn around time for an REO can take 1 to 6 weeks to receive a response to an offer as compared to 1 to 4 days for an individually owned property.
3. A Special or Limited Warrant Deed is conveyed for an REO, rather than the standard General Warrant Deed.
4. Corporations will usually only accept their own Purchase Agreements written in favor of the entity rather than using a standard approved Purchase Agreement.
5. REO properties are usually sold “as is” meaning they will not fix or repair anything. Private home owners know that negotiation may be necessary to sell their properties.
6. A minimum of 1% to 2% nonrefundable* earnest money is usually asked for and must accompany the offer on any REO property. (*Nonrefundable only if the offer is accepted)

When making an offer on REO’s, make sure you have accounted for the cost of everything that will need repairs, updating and other work. You may want to hire a professional to advise you in this area, since spending a few hundred dollars now can save you thousands in the long run. With some focused effort on making sure the numbers work out well, it could mean arriving at an awesome deal!

Both REO’s and a regular purchase, verification of funds will be needed on cash offers, or an approval letter from a lender stating that you can afford the property.

Dave Heinrich

612-715-3300