Purchasing a previously foreclosed home from a bank or lender can be a great financial real estate move. This is a great way to secure a home that may otherwise not be in your price range, or it may be a great investment to rent out or flip to resell for a profit.
Whatever your reason is for buying a real estate-owned (REO) home, you should make sure you protect your new investment with REO title insurance. Title insurance is always important when purchasing a home, but with an REO property, it is especially so.
What Are REO Properties?
REO stands for real estate owned and is a real estate transaction term that refers to properties that are foreclosed and are now owned by a bank or lender.
In essence, when a foreclosure property goes to auction and the bank or lender is the highest bidder, it becomes an REO property, and the bank/lender now owns the property.
Typically, REO properties are sold from the bank or lender to the new buyer “as-is” meaning the seller (bank/lender) does not have to disclose anything about the property, and the interested buyer cannot ask for things to be fixed. While an appraisal and home inspection should be considered so the new buyer knows what they are purchasing, they cannot ask the bank/lender to fix anything.
While You’re Here> Total Guide to REO Properties
The Perks of Buying Bank Owned Property
Buying an REO property from the bank/lender has many advantages. The main perk is that oftentimes these properties are sold below market value. The bank/lender does not want to hold onto these properties and is looking to make some money in return to pay off the remaining loan amount. This is good for you as the buyer as the seller will often sell them for lower than regular homes for sale in the same area and may even offer incentives to buyers.
In turn, this allows the buyer to purchase a home for a reduced price. The buyer may choose to use this home as their main residence, or they may choose to update the home—if needed—and resell it for a profit or rent it out as a real estate investment.
Purchasing a bank owned property is usually a win-win financially if the buyer understands the condition of the home and has the means to fix everything that a recommended inspection discovered.
The Importance of REO Title Insurance
While buying an REO home from the bank/lender has many advantages, the new buyers must also realize that there may be some things to consider when purchasing a foreclosed home.
REO homes became REO homes because the previous owner lost possession of the home, most likely due to not paying their mortgage. When a foreclosed home is sold, it increases the likelihood of possession dispute or issues with liens.
A previous foreclosed homeowner may also have other debts in addition to the foreclosed mortgage, and when a new owner takes over, they will be responsible for any outstanding debt or liens, unless protected by title insurance.
Title companies, such as True Concept Title, will do an exhaustive and comprehensive search on REO properties to make sure that there are no disputes over ownership or debts/liens. Once the title search is complete, title insurance will guarantee that there are no issues with the title and if one arises, the new owner will be protected and not have to pay anything.
Before Purchasing a Foreclosure > Do I Need Title Insurance on a Foreclosure?
Protect Your New REO Property with Title Insurance
If you are looking to purchase a bank owned home, make sure to purchase title insurance! You will also want to make sure you choose a knowledgeable title company that handles REO title searches and insurance regularly, such as True Concept Title.
A proper and exhaustive title search will make sure that your new REO property is completely free of debts and liens from the beginning, as well as having no issues with prior or undisputed possession. While title insurance is a must, it also is important to make sure the title search was done correctly in the first place, this is where having a reputable title team comes in.
Contact True Concept Title today at 813-263-7168 and let us help your real estate owned purchase with a comprehensive title search and insurance anywhere nationwide.