Orlando Real Estate

REO Sales, What You Need to Know

November 8th, 2014 10:38 AM by David W. Welch

Last week I filled in for Hazel Hissam. I am on her team working on REO properties in addition to my regular real estate practice. There seem to be a lot of folks (buyers and agents) out there who are unfamiliar with REO sales, so here are a few things you need to know.

The first important thing you need to understand is that REO sellers are a bit different than traditional sellers. They are dealing with thousands of properties across the country. They do intend to sell their inventory, but they really do not care if it is the property you are trying to buy or one of the hundreds of others they are negotiating on at any given time. So, when you start to think "don't they want to sell this property", the answer is yes, but that does not mean they are going to give you what you want. The longer it is on the market, the more negotiable you may find them to be, but if you play the waiting game you may miss out on the property too.

The second important thing you need to understand about REO sales is that each lender, Fannie Mae and Freddie Mac has their own process. You are not going to go around that process, and there are no short cuts to that process. These processes do not need to make sense to you, because they won't. You don't even need to fully understand the process. You do need to understand that when they give you a time frame, you need to meet it. If you do not meet their time frame, they will cancel your offer, and you will go back to square one. Pay attention to the instructions you are given, and follow those instructions. If they say wire the deposit - wire the deposit.

Finally, in Florida if you are purchasing an REO, it will come with a title insurance policy and a marketable title. Liens, home owners association (HOA) fees, taxes, etc., will be settled by the seller at closing. Do not write in extra verbiage on the contract or the sellers addendum stating "seller to provide clear title" or some other language about this. The seller will not sign "written in" terms or addenda with additional terms. I am not a lawyer, your agent is probably not a lawyer either, so if you have concerns about this speak to a real estate lawyer in your state to see how this works where you live. You should do this before signing a contract. You can also have a real estate attorney review the title evidence prior to closing.

Auction - The rules are different for auction properties. Most auctions I am aware of here in The Sunshine State only provide a quit claim deed, and do not warrant anything about the property. You should have your own title search and lien searches performed, before bidding on an auction property. Also, you will likely pay an "auction premium" of 5% of the sales price on top of your offer.
Posted by David W. Welch on November 8th, 2014 10:38 AM

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