Buying an REO property? Consider legal counsel…

This is not legal advice. For legal advice consult an attorney in person, not a blog.

If you’re considering buying REO (short for Real Estate Owned — the term used to describe the asset on the bank’s general ledger) you should seriously consider hiring an attorney. First, some background.

An REO house is a property that has been taken back by the bank. In other words, its a bank owned property. Banks acquire these properties most commonly either through a deed in lieu of foreclosure (where the owner/debtor agrees to deed the property back to the bank instead of going through the foreclosure process) or at foreclosure (where nobody bids more than the amount owed). Once the bank acquires the property, the bank wants to sell it ASAP. Banks are in the money business, not the real estate business.

As a general matter, a bank is willing to sell for a lower price than a typical homeowner. Accordingly, REO properties offer the opportunity for good bargains. The listing price may be lower, or the bank may be more willing to entertain a lower offer.

But there are downsides. The bank will probably have its own addendums to the PSA, which will almost certainly protect the bank at your expense. The bank will not convey title by a standard Statutory Warranty Deed, which will reduce or eliminate your ability to go after the bank if there is a title issue down the road. Similarly, the bank probably will not purchase title insurance on your behalf, again increasing your exposure if a title problem develops in the future.

So how can you get a good deal while still protecting yourself? That’s easy — hire a lawyer to assist you in the transaction. Unlike an agent, a lawyer can practice law. This means that the lawyer can review the contract to assure it sufficiently protects you. The lawyer see to it that title is ordered (even if at the buyer’s cost) and review the title report to identify any possible issues.

But what about cost — won’t a lawyer set you back and cut into your savings? Nope, not if you use us. We will assist you throughout the process, and we can address those issues unique to REO sales. We do so for a flat fee (a total of $3195.00) and then rebate to you the commission that is paid to us as your agent. That can be up to 3% of the purchase price! Comprehensive legal counsel to protect your interests, and you save money too? Now THAT’S a good idea…

Posted by Marc

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