Important Information when Buying An Albuquerque NM REO
by Barbara Gregus
Consumer Advantage Real Estate Services, LLC
August 14, 2014
Important Information when Buying an Albuquerque NM REO Property
As an Albuquerque REO agent serving the Albuquerque and Rio Rancho greater metropolitan areas, I have an interest in preserving local home values and helping stabilize our neighborhood communities that have been experiencing a high number of foreclosure activities. I believe that REO properties can be a great purchase for owner occupant buyers and first time homebuyers and these groups of buyers help stabilize our Albuquerque neighborhoods and communities when they buy an REO property.
The other day, an agent and I were in a conversation regarding one of my listings and he said that in his opinion, no first time homebuyer should ever buy an Albuquerque REO or foreclosed property. When I asked him why he thought this, he said, “Because they are always sold without repairs.” I asked him where he obtained his information from and he said it was his own observation. In questioning him further, he had sold only 2 other REO properties and it became obvious he was very misinformed when it came to the purchase of Albuquerque REO homes. I used this as an opportunity to educate him further and am sharing the gist of that conversation with you.
The agent did not actually know what REO was; he said all foreclosed properties were “bank owned.” While I’ve discussed REO properties before, it’s always important to clarify what REO is because many agents and buyers are confused. REO properties stand for Real Estate Owned properties. A bank may not necessarily own REO properties and many people confuse REO and bank owned properties and call everything bank owned or foreclosed. The majority of REO sellers don’t want their properties labeled as foreclosed because there may be the urge to stigmatize foreclosed properties due to myths such as foreclosed properties are not repaired, foreclosed properties are not in good condition, and these assumptions are often false.
In a typical Albuquerque REO process the property in question is reviewed and compared to other similar properties in the area in order to get the property ready to market. Adjustments are made to the comparable sold homes based on the condition, amenities etc. of the subject property. Careful analysis and consideration is done to determine what it would take to have the subject property appeal to the most likely buyer and their financing type. If the most likely buyer may be a first time homebuyer using FHA financing for example, then repairs to the property that would allow the home to be sold to a buyer using FHA financing may be suggested. Repairs for FHA financing requirements could be made accordingly. The seller of the REO property carefully weighs the costs, market conditions and the desire to sell to Owner Occupants and then the final marketing strategy is made. I want to stress that MANY REO homes are repaired and are in really good condition. If you are a homebuyer that took REO homes off your list of homes to look at, it is time to revisit these properties. If your agent doesn’t want to show you REO properties, you should ask questions as to why not? It could simply be they lack the experience and expertise of the REO sales process.
Almost ALL Albuquerque REO sellers have a period of time when the property is open to an Owner Occupant before it is open to Investors. Owner Occupant housing is a wonderful way to preserve home values and stabilize neighborhoods. REO sellers DO care about neighborhood stabilization and their mission is to look at Owner Occupants first and then Investors.
Once you decide to include REO properties in your home search, there are several items worth considering:
1. You like the property and it is in good condition but you really wanted an updated kitchen or bathroom. Did you know there is financing available that will let you purchase and conduct some remodeling? There is! Fannie Mae, Freddie Mac and FHA have their own financing available that will let you purchase a property and remodel. Every financing program is unique but these loan programs are worth investigating.
2. You’re a First Time Home Owner; can you buy an REO property? You can! There is nothing that prohibits you from buying REO properties. It is important to understand your financing. If you are using FHA 203B, can you purchase the property in the current condition? Some typical items that must be considered in order for a home to be FHA financeable are:
a. Termite Damage – Are there conditions that could lead to infestation or is there adequate crawl space and earth to wood contact (crawl space must be a minimum of 18 inches from joist to ground)?
b. Plumbing Problems – do you see any signs of water leaks, missing valves or loose or missing fixtures?
c. Security Bars – security bars must have a safety release mechanism available.
d. Roof – signs of leaks or missing or warped shingles?
If you can see obvious repair issues such as the ones listed above, the property may not be available for FHA 203B financing and you may need to consider FHA 203K financing. Some of the REO sellers will not do repairs after the property is on the market. Don’t expect repairs and make sure you have a solid understanding of AS IS Condition. If you are using conventional financing and utilities cannot be turned on, the home cannot be appraised for financing. Renovation financing would need to be used.
Get a home inspection. Depending on the property, you may or may not be able to have utilities turned on. Regardless, you should have an inspector go through the property and inspect all items that can be inspected. There are typically deadlines on inspections so watch those dates carefully. If you decide not to purchase the home due to home inspection results, you will need to terminate your contract in the inspection period that is stated in the contract or you could lose your earnest money deposit.
Any buyer may want to consider looking at Albuquerque REO properties as part of their home search. Albuquerque REO homes + the proper financing = a happy buyer!
For questions on getting started with an REO purchase, email Barbara Gregus at: Barbara@CaresABQ.com or call my buyers specialists at 505-559-4480.Share