Gary Wuestenberg's Blog

First of all if you are reading this, thank you. Also, if you ARE reading this you probably know what an REO is. REO stands for Real Estate Owned – property owned by a bank after foreclosure. I am not here to tell you about which REO’s to buy but rather how to buy the REO you want. This is the first blog on this topic.

REO’s are good values as long as you do your homework. A lot of these properties are in disrepair and need some kind of work to make them a nice home. The banks like to sell these properties AS-IS. In other words they do not want to do any repairs. That doesn’t mean they won’t do any repairs, it just means they don’t want to. So don’t be afraid to ask for repairs. Legally, once something is discovered on a property, like a leaky roof or faulty windows or even foundation issues or termite damage, it has to be disclosed. Whatever the condition is it has to be disclosed to you the current buyer or the next buyer. So once the problem is discovered the seller has to deal with it one way or another. They can agree to do the repairs, agree to split the repair costs, agree to credit for the repairs (this is the most common way for the bank) or they can do nothing at all and leave it up to the buyer to take the property as is. Depending on the amount of the repair cost and the type of loan most buyers won’t take the property as is. This leaves the seller in a precarious position because if they lose this buyer the condition is still there and has to be disclosed to the next potential buyer and any that come after that. And in this market with home values still dropping the seller is probably better off agreeing to repairs as long as they have a strong and committed buyer. So don’t be afraid to ask for repairs even if the property is marketed AS-IS. This is even more pertinent if you are using FHA financing. But that is for another blog.

Thanks for reading!