Buying bank owned properties " Foreclosures "
There is a lot of interest in buying bank owned properties these days. A lot of information, some good and some bad, is floating around about the subject. Often the information offered is for sale, with the promise that you can make a lot of money with little effort once you know the secret formula. The fact is that there are no secrets, and to make money does require effort.

Whats an REO?
REO stands for Real Estate Owned. These are properties that have gone through foreclosure and are now owned by the bank or mortgage company. Many are Cape Coral foreclosed houses.

This is not the same as a property up for foreclosure auction. You'll receive the property 100% as is. That could include existing liens and even current occupants that need to be evicted. A REO, by contrast, is a much cleaner and attractive transaction. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will see to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Do be aware that REOs may be exempt from normal disclosure requirements. In Florida & California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are aware of.

Is it a bargain?
Its commonly assumed that any REO must be a bargain and an opportunity for easy money. This simply isn't true. You have to be very careful about buying a REO if your intent is to make money off of it. While its true that the bank is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it. When considering the value of a REO, you need to look closely at comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the house for resale. The bargains with money making potential exist, and many people do very well buying foreclosures. But there are also many REOs that are not good buys and not likely to turn a profit. Many with code violations or other serious problems may end up in an auction. There you must be extremely careful.

Ready to make an offer?

How to buy a foreclosed home in detail

1. You do not and should not pay for lists of foreclosures. They are listed through Realtors and available through Exclusive Buyers agents and more.
2. Once you find an exclusive buyers agent in that area, decide which types and prices of homes you want to see.
3. Before you start looking, have a check of at least 2k (Min 10% for cash) in a money order not a check due to clearance time. Have it made out to any local title company or ask the agent.
4. Have proof of cash in writing (if applicable) for the balance to close.
5. Getting loan? Have a pre-qualification letter done right. Should have the maximum amount you are qualified for, interest rate, date (no older than 3 mts) and the fact they reviewed credit and verified assets. (you cannot use a credit card.) I have a buyer now with a letter that is no good.
   Many lenders do not do it correctly. Make sure or all is lost in the offer stage. Have the lender put the highest amount you may be qualified for. “It shows strength.”

I have a lender I know and trust. 100% loan approval. Others have around 33% (1 in 3 have an appraisal issue) of loans not closing due to low appraisals.
Many have cheap appraisers, if you get your own lender, that appraiser may appraise the home very low by computer. Many never see the home. Then you must pay cash for the difference or not close. Use my recommended lender. I get nothing for this accept the deal closes and everyone is happy.
Condominiums now have a new issue. Insurance. The insurance companies are walking. Hard to get. Due to depreciating values you will find lenders cannot get PMI (mortgage insurance) on Condominiums. See my Cape Coral Florida Real Estate blog for full details. That means you have to come up with 21% dn.

Update! However, lenders have figured out a way around this rule, by seperating the one loan into two. Since they only look at whatever loan is in first lien position, now you can finance 100% of the value of a home, on two loans, one at 80% of the value and the second loan at 20% of the value. Since the first loan is at or below 80%, there is no PMI insurance.

If you found a great Exclusive Buyers agent like at Sunny Spot Realty Inc. you should still check the offer which will be an “as is” contract. If not done right it will not even be submitted. The agent should check for downloadable addendums or other specific requirements to this lender and property.

6. Do not expect to low ball a foreclosed home or ask for concessions. There are exceptions. Ask us! If you ask for concessions your loan type must say, "allowed up to 6% seller concessions." The Lender (owner) has usually set the price low to cause a bidding war and it is working. To date the offers made have from 3 -45 other offers. I would not expect a counter offer. Counter offer is not in their methods.
7. What they may do is, submit a form stating “this is a multiple offer situation, is this your highest and best offer?” You will never know if this is true but it most likely is.
8. The market conditions in my part of Florida “Cape Coral” is hot with many buyers.
9. Once you choose a very experienced Exclusive Buyers Agent, ask questions, If you start working with a very good agent and have an attitude that you know more than the agent, you will set a tone for no advice. "Ok! Do it your way." About the third time you lose a dream home you will come to realize you need the agents help. Kind of late but better than never. If you are looking for a saltwater canal pool home in Cape Coral fl and you miss three. Whew! You may not find another even close to that price. We try to work with you as a partner in this serious venture and enjoy it.
   We just had a couple that I found a 3500 sq ft home on a lake, pool,spa, 6 bedrooms like new. One of a kind. They did it their way, low balled the offer, wanted concessions. Did not listen. Lost a steal at 264k. I felt sorry for them but what am I to do if they will not even consider my advice?
   We currently have 4 buyers looking for a pool home on saltwater canal in one Company. Imagine how may are looking with all of the agents.
10. When you put a date for acceptance allow a week (working days). Pushing the date too two days is meaningless to the lender and you will be out of contract before they even have a chance to review it.
11. Date to obtain financing. Allow at least 45 days. I do not care how good you think your lender is, there is a new twist. The lender hires auditors and their job is to find some silly fault with the loan. They do this at the last minute. If you have 30 days on the offer and you cannot get the loan in that time limit, you have signed a addendum that comes from the lenders attorneys that you have to pay around $100.00 per day over the date on the contract.
12. Closing date: 60 days or sooner. If you put 30 days, you will be out of contract if delays happen. Then you must try to ask for an extention,  pay the daily fee or even lose the home altogether.
    All of my deals have closed sooner with acceptance by the seller, you (buyer) , lender, and the title company.
13. Do not leave blanks in the offer. Fill them in with 0 or whatever is applicable.
14. Once the offer is accepted, they will send you the addendums from 3 to 35 pages long written by their attorneys. Here is where you will be glad you hired an Exclusive buyer agent with a lot of experience like Joseph Beauvais. If you did not hire one, shame on you. Now you need an attorney. $$$. An attorney is paid to change things, and they will. However the bank will not accept changes. "interpretation only"
    The addendum supersedes the written offer. It normally takes away nearly all of your rights.
15. Inspections are very important and the addendum will change any time you put in the offer to 10 days.

An exclusive buyers agent is used to working with these inspectors and can recommend a really good one.

Remember this is an “as is sale”. Nothing is normally removed like the refrigerator or air conditioner but if they do not work, they will not cover them. You must understand this is your only way to get out of the contract and get your money back. In the addendum there is one term used that has (to my knowledge) no case law to cover this term and define it. “major defects”. “Structural defects" are the terms normally used. The inspection will reveal both structural and cosmetic defects. You are able to get out of the contract for “structural defects”, perhaps not under “major defects”. It depends how it is written. I have 14 years of core law schooling to help you.

Remember, any items in the home are not included. They will be left but may not be working nor part of the sale.

With all of that being said, I sell many foreclosures and have had little problems. I hope this extensive article helps other agents as well as buyers.

Cape Coral Real Estate Search thousands of Cape Coral, Bonita Springs, Naples & Ft Myers homes for sale with our Free MLS Search. We have the Largest list of homes for sale in Lee County.

Buying Foreclosures in Cape Coral Florida. Search thousands of Cape Coral, Bonita Springs, Naples & Ft Myers Foreclosures for sale with our Free MLS Search. We have the Largest list of homes for sale in Lee County.