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Accordion Sample DescriptionREO stands for Real Estate owned, and is another way to refer to a bank owned property. This is property that the bank has taken back through foreclosure. Sometimes a seller who is behind in his or her payments will attempt to sell his or her house before it goes into foreclosure. To do this, you must negotiate with the bank to accept less than what is owed on the property, and this is known as a short sale. This short informational section describes purchasing an REO, not a short sale, which is altogether different.
Whenever anyone sells a house in North Carolina, they must by law give the home buyer a Disclosure Statement. This document describes what is included in the house, what is broken, and other legal and environmental disclosures. The seller has to tell you about any defects he knows about, especially if they are hidden and you might not see them. The seller can be held liable for defects that appear later that were not disclosed when you bought the house. The exception to this law is an REO. Banks are exempt from giving you a Disclosure Statement. For this reason it is absolutely imperative that you do a thorough inspection with a licensed and bonded contractor before purchasing any REO.
After the initial offer is made in writing, counter offers are made verbally until agreement is reached. This is a slow process because the bank may be in a different time zone, or the responsible people are tied up in meetings. It may be many days of verbal countering before a final agreement is signed by all parties. During that time, there is a danger that another offer will come in better than your offer and the bank may accept it. This is especially likely to happen if negotiations go over a weekend. The rule of thumb is to try to reach contractual agreement with the least amount of counters.
The bank will probably require that you get pre-approved with their institution within a few days of accepting your offer. They naturally want to cut their losses on the property by making a new loan on it. You will need to go through the loan application process with them, even if you get the loan somewhere else. While they can ask you to apply with them, no one can tell you where to get a loan. That is your choice entirely.
The bank may insist on a settlement and title company that they choose. They have previously negotiated fees with these companies, so they know what their expenses will be. Many times the settlement officers are so overloaded with business that the real estate agent has to assist in getting the property closed. For this reason, it is important to choose a REALTOR who is willing to work harder than normal to make sure you get the house you want.
The bank may use their contract, not the standard NC Association of Realtors form. Often times they use our standard form and their contract “addendum” as well – this is simply the contract written in their own terminology. It is critical that your agent read this form thoroughly to make sure your interests are protected.
Often times a foreclosure home is priced so well that several buyers may put offers on the same property. In this case all buyers will be notified by the listing agent and they will be asked to communicate their highest and best offers. Normally there will be a time limit for when these offers must be communicated back to the listing agent. At the time that all offers are received back within the deadline set by the seller they will then be presented to the seller. The seller will then choose which offer he/she deems to be the best overall offer and negotiations will commence with this buyer individually.