If the bank does not succeed in selling their confiscated property through auction, this property will become their stock. This confiscated property is called bank property or REO, which stands for "real estate owned". Banks will ask their asset managers to manage REO which will then be entrusted to property agents. By property agents, REO will be listed in their stock list for sale like any other property. Buying an REO can be even easier than buying a property directly from a homeowner if you know what to do and how to buy it right.
Step
Step 1. Start looking for REO
You can search for REO but may not be able to distinguish this property from the others. However, because banks usually have so many foreclosed homes in stock that will continue to drain their money, there is an incentive they offer to get out of this stock immediately. This is where you should look. There are three different places where you can look for REOs:
- Look in the full list of properties called MLS, which stands for Multiple Listing Service full of REO. You can ask your local real estate agent who can help you find REOs within MLS.
- Look on the bank's website. Many banks proudly list their REO stocks on their mortgage and home sales pages.
- Look for foreclosure service websites. Some foreclosure services require you to pay to access their site, but you can also look for free websites.
Step 2. Get pre-approval for loan withdrawal (given by the creditor after analyzing the financial statements and credit assessment of the prospective debtor) or a certificate of loan withdrawal (given by the creditor without a credit analysis of the prospective debtor
) Having pre-approval of lending before you seek REO is the most appropriate step. It's even better if you can get a letter of credit approval from a bank that wants to sell REO because the process of buying this house will be very easy. Some lenders (such as Veterans Affairs in the US) may offer loan facilities with fewer options, usually if the house you want to buy is not selling easily, so you need to be careful in choosing the REO home you will buy.
Step 3. Decide whether or not you want to search for homes at a discount
Since the bank's business activities aim to make money, the REO prices they propose will be very competitive in the general property market. On the other hand, properties at discount prices are usually sold in problematic conditions and many will be interested in buying. On the other hand, less troublesome properties will be offered at market rates which will probably not affect the REO purchase.
If you're looking for an REO at a discount, banks usually offer an incentive to sell their REO stock quickly. Since the bank offering the REO was unsuccessful in selling this property through auction because the lowest price they asked for was not reached, the selling price they are currently offering should be even lower if the bank wants their property to sell quickly
Step 4. Carry out an assessment and/or examination
You need to spend a little money if you want to feel at ease. No potential homebuyer should forfeit their right to an inspection, let alone confiscated property. A few million rupiah can save you from embarrassment and eliminate the risk of spending tens of millions of rupiah because you just find out that (for example) the entire power grid in this confiscated property must be repaired.
Step 5. Check the status of the deed/certificate of proof of property ownership before making a sale transaction
Checking the status of the deed/certificate of proof of property ownership is a service that you must pay to ensure that this property is indeed owned by the interested party and its status is in accordance with the regulations related to the property. For example, checking a property title deed may reveal that the property is still bound by a lien, and must be paid off at the time of sale. If you are not aware of a lien, there will be a large additional fee when you buy this property, even though you should already know the total cost you have to pay before making a purchase transaction.
Another problem that may be revealed could be in the form of restrictions that are still binding on this property, such as rental agreements and easements, namely limited privileges to use property belonging to other parties. Buying a property and then finding out that you can't expand because of an easement can be a big problem for you
Step 6. Wait for a response from the bank
Bidding on an REO is different from bidding on a typical property. For example, homeowners who sell homes traditionally will respond more quickly to offers to sell their homes quickly. Banks don't usually like that because they will try to show potential buyers that they want to get the most money out of REO and this means they are likely to offer a higher counter price than yours, even if your asking price is actually reasonable. The process of buying and selling through this trade-off is usually very slow, so you have to be prepared for it.
Step 7. Find out about your loan approval
If your asking price has been approved and you can own the property, find out if the lender is willing to lend you money for the price of the foreclosed house or for a more general amount than you expect. If your credit score is very good, you can get good loan options with low down payments and attractive interest rates. Congratulations on your new home purchase!
