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REO Foreclosures in Frisco Texas
Frequently Asked Questions
Q: What is a REO?
A: A REO “Real Estate Owned”
property is a house that has already gone through the legal process of
foreclosure and the bank or financial institution has taken ownership.
Q: How do I buy a REO?
A: Buying a REO is much like purchasing any other
house. You can pick from the available foreclosure listings and through your
real estate agent make an offer to the bank. When a sales price has been
negotiated, inspections are done, financing is arranged, and the property is transferred to
the buyer at closing. See
Foreclosure and Short Sales
Buying Tips.
To submit a purchase offer on a REO, all offers must
include a pre-qualification letter or proof of funds and a photo copy of a
certified bank check showing the amount of intended earnest money. The bank will
not accept any offer without proof of buyer financial capability.
Q: How much can I save on a Bank Foreclosure?
A:
The savings vary from house to house and there are many factors that determine the
sales price. One variable would be the DOM “days on market”. The longer the
property stays on the market, the more anxious the bank gets to sell it. Another
consideration is the amount of money owed on the house when it was foreclosed
on. There's a myth that the bank doesn't look at what they're losing on the
investment and only looks at the current assessment to determine the sales price
but history has disproved this thought. It’s usually all about the bottom
line. A third influence that affects the selling price is condition, this
usually coincides with how many days the house has been on the market and the
most recent assessment.
I generally look for properties that are
selling or would sell for a minimum of ten percent below market value, so a $300,000
house, in move-in condition, would be a good deal at $270,000 or below.
The real estate listing agent will notify
the bank of a recommended sales price when the house goes into the system. Many
banks will take the recommendation and may lower that price to obtain a quick
sale. If the bank ignores the recommendation, the initial list price could be
set too high and the house will usually remain on the market for an extended
period of time.
Subsequently, after a few months, and a re-evaluation, the price will normally
drop to a more reasonable level.
Keep in mind that homes in Frisco are
highly valued and the number of foreclosed listings average
less then 5% of all real estate for sale in Frisco. There are always new buyers
constantly coming into the market and people
sitting on the sidelines looking for a good deal. For this reason alone,
thinking that you can offer the bank 50 cents on the dollar or some other
ridiculous price will only result in a rejection and someone else buying your
house.
Many great deals continue to hit the
Frisco market on a weekly bases. If you're looking for one of these deals there
are may possibilities but use caution if you think the banks are having a fire
sale. They want to sell their properties fast, but they will not give them away.
Q: Do all foreclosures have value?
A: No, a comparative market analysis
should be done to
compare the foreclosure with other listed properties that have sold in the area.
This will determine if there is any real value. A few
foreclosures are sometimes listed at or above the current market value.
Q: Can I have an inspection done on the house?
A:
Yes, since the bank who owners the property has no idea what actual condition
the house is in, and they are not required to provide a sellers disclosure to the buyer, an
inspection period of seven to ten days is usually allowed. However, banks do not give an unrestricted
right to terminate the contract, which means, if during the inspection period
some
costly defect is found, the bank usually reserves an option to remedy the problem and continue on
with the sale. In the event of a major issue brought up by an inspection, the
bank usually grants a cancellation of the contract and the buyer receives their
earnest money back.
Q: How do I finance an REO?
A: This process is
similar to buying any other house, but there are a couple of things to keep in
mind. Prequalification letters are required to submit an offer on any bank owned foreclosure. If you do not
have this letter, or proof of funds if paying cash, the offer will be rejected
without consideration. Most banks selling REO’s will not allow repairs to be
made to the property before closing, this could be a catch 22 situation if the
property needs some type of repair in order for a new loan to be issued. If
there are structural issues or the house is in need of extensive repair, your
finance company will probably want the house fixed before closing.
Q: Do all foreclosed propertied need repair?
A: No,
many foreclosures are in move in condition with no real need of repairs. Of course,
location and age of the home plays a big role in the condition of any
foreclosure; newer homes are generally in good condition, maybe needing some
interior paint and possibly a carpet cleaning or replacement. Usually newer
higher priced houses are in the best shape, the older home that fall victim to
foreclosure tend to need more repair simply from attrition and the lack of upkeep by the previous owners.
Recently, Fannie Mae
has been revitalizing some of their foreclosed homes prior to sale by installing
new carpet, painting the entire house and making other necessary repairs to make
the house more attractive to potential homebuyers.
Q: Will the seller pay
part of my closing costs?
A: Maybe; when making
an offer, seller contributions can be added to the contract lowering the amount
you would have to bring to closing but not all banks will offer this option.
Q: How long does it take to buy a foreclosure?
A: It usually takes about a
week to negotiate a deal with the bank provided the submitted offer price is
reasonable, and from the date of an executed contract you are looking at about 30 to 45 days
to close if you are financing the purchase. A cash purchase can be closed in two
weeks or less. What the selling bank really wants is a
quick sale. The sooner the closing, the sooner they stop losing money; but
keep in mind, the bank's addendum generally contain a "per diem" interest paragraph
allowing them to hit you with a fee if the closing has to be extended due to
buyer fault, so asking for a little extra time up front may avoid additional
costs should something happen to stall the closing. For every day a closing is
delayed due to any fault of the buyer, the seller can assesses a daily fee that could
range from $100.00 up to $300.00.
Q: Where do I start?
A: If you're
ready to buy a foreclosure call 214-336-7088 or e-mail me at
jay@foreclosuresfrisco.com. We can discuss the possibilities and start right away.
Frisco
foreclosures offer a tremendous amount of value and we also service Allen,
McKinney, Prosper, Plano, Lewisville, The Colony, Sachse, Wylie, Murphy,
Richardson, Carrollton, Flower Mound, and many other areas around DFW.
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