There are several different types of bank foreclosed homes but they all have a very common element.  The Homeowner could not pay their mortgage payments.  When a homeowner falls behind in payments to the bank or owner of the secured note, an attempt to mitigate the end result of foreclosure begins.  When the homeowner cannot comply with the terms of repayment for the missed payments, the bank or owner of the secured note initiates the foreclosure process.  In Nevada, the foreclosure process takes a total of 120 days.  The initial process or pre-foreclosure period lasts about 90 days.  The next process is the Foreclosure Sale period in which the upcoming Foreclosure Sale must be advertised for 30 days. At the time, date and location of the advertised Foreclosure Sale will be an auction that is open to the public but any person interested in bidding on the property must pre-register and provide proof of financial ability to pay for the property in cash. If there is not a bid that is above the minimum amount owed to make the bank or owner of the secured note, the property will revert back to the bank. At this time the home is a bank foreclosed homes .

In the case of a home with an FHA loan it becomes a HUD home.  If the home had a VA loan it becomes a VA bank foreclosed homes .  These are government repos that have a well defined disposition process.  These homes will very in condition and will always be sold in their current condition.  A real estate broker that is certified by HUD must assist you in accessing the home as well as submitting your bid to HUD. The VA repo homes have a more normalized process but do require that all offers will be held for the first 10 days they are on the market and then they review all the offers and decide which one they want to work with.

In the event the home was secured with a conventional loan, there are many different types of sellers.  Sellers may be the bank themselves, Fannie Mae or Freddie Mac (loan purchasers), mortgage insurance companies, or third party companies that specialize in disposition for banks and secured note holders that do not have departments to handle bank repos.  Some of these secured note holders may be investment firms, pension plans, and insurance companies. These types of bank foreclosed homes differ from HUD and VA.  These bank foreclosed homes  are sold in their current condition or may be repaired prior to sale. Banks now look at the sale of repos as a way to recoup some of their losses or possibly profit by repairing a property to sale at a retail price in the marketplace. Real estate brokers are the best source for access to bank foreclosed homes as most of them are listed with real estate companies to reach the mass buying market.

How do I go about purchasing an REO Home?            

First you need to find a Real Estate Company, Real Estate Broker or Agent that specializes in handling Foreclosure properties. This could be the listing agent of the property that is provided to you with a foreclosure list. The best way to find a Real Estate Broker that specializes in Foreclosures would be to check out the following Foreclosure web sites that are used by the Brokers that sell Las Vegas foreclosures: are two sites that are used like a MLS for Bank Foreclosures. And are websites that list Brokers that specialize in handling Foreclosures. Lender owned properties are sold "as-is". The buyer is expected to do an inspection, with a licensed contractor, at the buyers expense. The seller has never lived in the property, and in most cases never personally seen the property. The buyer will be required to sign an "as-is" addendum, and a terms addendum, which is specific to dates, late fees, related services and conditions.

$$ Saving Strategies for non-HUD and VA REOs

The days of the "deals" and "steals" are ebbing away in the bank repo resale market.  Banks are now looking to "retail" properties in order to minimize loss or in more cases, maximize profits.  While there are still "as-is" fixers available in the marketplace, more and more bank repos are being repaired prior to exposure on the open market.

REO properties can still be a great buy.  They can be an even greater buy using the strategies outlined below to create offers the bank will bite at a lower price.

Closing - Quick closings equals a better sales price.   Have a strategy to close on the home in 10 days.  In a multiple, competing offer situation with all other terms being equal, the quicker close will be selected in most cases.

Cash - A cash deal will always win over an offer tied to financing with other like terms.  You will need to provide proof of funds at the time you submit your offer.

Buying with Financing - If you need to acquire a property with financing, remember these guidelines to save you money.  Use private financing first (especially if buying a property in need of repair).  You can resort to conventional financing if the home is in relatively good condition.  Have your loan approved prior to buying.  In some cases, this is like a cash offer.  It will also allow you to commit to a quicker close.

FHA & VA financing - In the world of bank foreclosed homes (outside of HUD and VA repos) this type of financing is a last resort for banks to accept.

Writing a clean offer - In your quest to obtain the best possible price for your REO home purchase, submit an offer that does not ask the seller to pay points, make repairs, use a title company other than their preferred company, or request home warranties.  The cleaner the offer (as much like cash) the better.

Contingencies - Do your best to eliminate any contingent concerns prior to writing the offer (home inspections, profit study, contractor inspection, financing, etc.).  Contingencies are like mines in a mine field.   The seller (bank) will walk the field with less mines and will give up a few dollars to do so.

Important! - Remember the seller of the property is not local in most cases.  Nor have they seen the house or have any emotional attachment to it.  The seller negotiates strictly with numbers and looks for the least amount of potential headaches.

What Should I Expect in Purchasing an REO (Bank Repo)?

We’ll break this down to 3 categories: the home search,  offer negotiating, and the closing process.

The Home Search

Where to start?  There are several avenues to consider when looking for bank foreclosed homes.   They comprise of email/web lists, searching through magazines, looking for postings in the newspaper, or contracting a real estate bank repo specialist to do your homework for you.

The best homes always sell first.   Being among the first to know of a property can mean everything in finding the home that is right for you.  Some buyers are experienced in remodel and estimating the cost to repair possible deficiencies.  For those that are not, securing a contractor/advisor to evaluate a home in consideration should be considered.  It is important to consider your out-of-pocket costs when you make your offer and that the cost to repair will not make your buy a bad buy (above market). 

You may wish to consider having your real estate agent have an offer (purchase agreement) completed without price and address so a submittal can be done immediately.

Offer Negotiating (non-HUD or VA homes)

Point number one – the cleaner offer, the better.  Have your agent consult with the bank rep to determine the protocol for offer presentation and strategy.   Submit your loan approval letter with your offer. Do not expect an immediate response to your offer!  Some banks will take several days to respond.  Most offer submittals will be countered by the bank providing the buyer has offered at least 90 percent of the list price.  Most do not respond to low ball offers.  There will be addenda to be signed by the buyer along with the counter offer that has been agreed to by all parties.  Most negotiations after the original offer will be via fax, email, or verbal until the point of agreement.   Do not expect a closing period of longer than 30 days.

 The closing Process

The minute that both seller and buyer have come to agreement on terms, original documents with original signatures will have to be forwarded to the seller for their signature.  Escrow will be opened at the title company of the seller.  Most selling banks have national accounts with title companies that offer a total package for them from the time the bank forecloses to the time the bank sells.   The due diligence (inspection) clock starts ticking.  Normal time frame is 5-7 days.  This will be a contingency in the purchase.  If you do not like what you uncover and the bank will not repair, you do not have to buy.  Once this period is over though, it’s do or lose. Performance is key.  Do not miss dates or deadlines!  It will cost you dearly.  Most banks have penalties for not closing on the agreed date.  The first day late can cost up to $400.00 in some cases.  Make sure your lender understands this – try to get them to be accountable for non-performance.  Do not expect to be able to move  into your new home until the title has officially passed from the bank to the you.  There is no movement regarding this.  The banks are non emotional seller and only see the liability of the situation not the accommodation point of view.

---Thomas Blanchard, Broker Owner of 1st Realty Group-REO Asset Services, specializes in the marketing, selling and buying of Foreclosures in Las Vegas. He and the Real Estate Agents that work with him have many years of experience dealing in Las Vegas Foreclosures and Pre-foreclosures. To set up an appointment for a one on one meeting or to get additional information regarding how 1st Realty Group-REO Asset Services can assist you in buying a Foreclosure or Pre-foreclosure