REO
REO is an acronym used by financial institutions, which means Real Estate Owned, and has come back into the bank's portfolio via a foreclosure process. The purchase of a REO property is much different than conventional homes and outlined below are the major points of difference. Most REO properties are sold as is with the seller making no repairs, and is addressed in their corporate addendums stating that the buyer will purchase as is but still have the right and contingencies of
inspections. Furthermore, the seller does not provide a sellers disclosure statement, as they have no information on how the former owner was maintaining the property other than what is evidenced by the home's current condition.

Financing
It is of the utmost importance to be pre-qualified or better yet pre-approved by a financial institution prior to making an offer on a REO property. In most cases the seller will not even respond to an offer without verification of the buyer's ability to procure financing.

There are several financing programs available for the purchase of as is properties and we can provide you with the information on these programs. Most sellers will not hold second mortgage, allow preoccupancy, but in some cases the seller will offer special financing incentives. Furthermore, some sellers may require that the buyer be pre-qualified by one of the seller's loan representatives to give them the assurance that financing will not be an issue.

For those buyers making cash offers, the buyer must be prepared and willing to provide the seller with written verification of funds available to close. Also, some sellers may require cash buyers to close within 10-14 days after contract acceptance.

Offers
It is important that the buyer realizes that a REO property is owned by a corporation and replies to that offer may take anywhere from 2-5 business days. Many times the offer process has to go through different levels of management for a counter proposal or acceptance and the buyer must be patient for the corporation process.

Multiple Offers
n many cases, REO properties will receive several offers on a property, and the seller will instruct the listing realtor to inform all potential buyers that there is a multiple offer situation, and will request that all buyers present their final and best offers within 24 hours and will then decide on which offer they will work with. The seller is not obligated to accept any of the offers if none meet their requirements for the property and may counter offer the offer they feel has the most merit. Usually, the seller will require the listing realtor to keep the property on the market for acceptable back-up offers if there are any problems encountered with the first position
contract, so they don't lose marketing time.

Closing
Most financial institutions require a 30-day closing period and if the buyer is not able to close on the date specified in the contract, the seller will normally have a clause in the contract that if the buyer requests a closing date extension, then the buyer will be required to pay a per diem penalty as a condition of an extension. If the per diem penalty is $50.00 a day then that amount is multiplied by the number of days past the original closing date and the buyer will have to pay that amount at the time of closing. Example: $50.00 a day per diem multiplied by a 10-day extension would be a $500.00 penalty paid by buyer at closing.

Furthermore, the Seller, Listing Realtor, or Title Company is not responsible for the ordering of a survey, termite report or home inspections and is the responsibility of the buyer.

If you are in the market for a foreclosed home, you are at the right place!

If you are in the market for a foreclosed home, you are at the right place to get the help you need in the Oklahoma City metro area. We are experienced with foreclosures and will help you buy a foreclosed home in the Oklahoma City market place. HUD, VA and institutional lenders sometimes offer excellent buys on foreclosed real estate and we can assist you in finding the right home.

HUD, VA and bank owned homes are usually purchased through licensed real estate agents and their approved brokers. We have access to all homes. HUD and VA have a strict bidding procedure and the bids are opened on a specific day of the month. The highest bid will get the award. Institutional lenders usually list their properties directly with a real estate broker and operate in a more traditional sales manner.

FORECLOSED HOMES ARE USUALLY PRICED TO SELL.
Most foreclosed homes are priced at fair market value. However, VA and HUD homes are often priced below area comparables. Furthermore, you may, through the bid process, be able to purchase a home below market value if you shop carefully and use an experienced agent to help. We can help. We can also help you by giving you the comparable pricing information for the community to help you make a good pricing decision when you prepare your bid. You will need to get pre-qualified before making a bid and we will help. We work with lenders who are familiar with the procedures and will prepare the pre-qualification document before you begin your home search. There is no fee for this service. It is of utmost importance to become pre-qualified or better yet pre-approved; as most lenders will not even entertain offers without proof of lender qualification.

YOU CAN BUY A FORECLOSURE HOME.
Anyone with the cash or ability to obtain a mortgage loan can buy a foreclosed home. You will have to qualify for the mortgage as with any home purchase, but we'll help you with the financing, too. Often, the cash needed to buy a foreclosure is less than you would need to buy a home offered for sale by a non-foreclosure homeowner.

FORECLOSED HOMES CAN BE A BARGAIN!
HUD homes are sold "as is" and HUD does not make repairs or offer warranties. However, the HUD homes are usually the best priced and offer the best value. If you are willing to invest some 'elbow grease' in your home, you can get a good buy and make repairs and redecorate to make the foreclosed property a real home. Many will need cleaning up or cosmetic upgrading, but generally your home will be worth a lot more than you paid for it when you have put your decorating touches to work. VA will make some repairs and VA foreclosures are generally in better condition than HUD homes. Institutional lenders evaluate the homes on their individual merits and will determine if the home will be sold "as is" or repaired. Institutional lenders tend to be less rigid and may be negotiable on repairs.

WE'LL PREPARE ALL OF THE PAPERWORK.
We will prepare the bid and all of the contract paperwork for you if you select to bid on a foreclosure. Often the details of closing help and terms and conditions are as important to a seller as the price. We'll consider all of these needs when we prepare your offer.

Real Estate Foreclosure Terms
A B C D E F G H I J L M N P Q R S T W

A

Appraisal - An opinion of value.

Assessed Value - Value placed on property by the County for the purpose of computing real property taxes.

B

BPO - Broker's Price Opinion also called a Comparative Market Analysis. A method of appraisal in which selling prices of similar properties are used as the basis
for arriving at the value estimate. Institutional sellers usually rely on a BPO prepared by a real estate agent and a professional appraisal to determine a listing price.

C

Certificate of Sale - A certificate issued to a buyer at a judicial sale (e.g. foreclosure)

Certificate of Title - This certificate is issued to a buyer 10 days after the foreclosure sale.

Certified Funds - Same as cash. Buyer's monies must be brought to the closing in this form.

Closing - The final accounting of the real estate sale. The closing Statement outlines the costs on both the buyers and the seller's side of the transaction.

Contingent - Dependent upon conditions or events. There are conditions the institutional seller will consider in an offer to purchase such as the ability of the buyer to
obtain a mortgage or perform inspections. The sale of another property to raise sufficient funds is an example of a contingent usually not considered.

Contract - A promise. Only when an offer to purchase has been fully executed (signed and initialed) by buyer and seller does it become a contract.

D

Default Judgment - Against someone because they failed to show up in court.

Deficiency Judgment - Decision requiring a borrower to pay the lender the difference between the mortgage balance and the amount realized at the foreclosure sale.

E

Earnest Money - An amount of money given with the offer to purchase as a "good faith" gesture of the buyer's serious intent. Although not required by law in Florida,
most institutional sellers require a minimum $500-$1000 deposit in a trust account with an offer.

Escrow - The deposit of funds with a bonded neutral third party with instructions to carry out the provisions of a contract. Earnest money deposits are usually held in
the trust accounts of a real estate Broker, title company or attorney.

F

Fee Simple - Complete legal ownership of a property.

Federal Housing Administration (FHA) - Federal agency that administers FHA insured loans.

Federal Tax Lien - An obligation to the federal government as a result of non-payment of taxes.

F.N.M.A. - Abbreviation for the Federal National Mortgage Association affectionately known as "Fannie Mae", an agency which buys blocks of loans from banks.
Due to its size, Fannie Mae Foreclosures make up a significant percentage of our Florida inventory.

F.H.L.M.C. - Abbreviation for the Federal Home Loan Mortgage Corporation affectionately known as "Freddie Mac", an agency performing a similar function to
Fannie Mae and now much larger. Special financing is offered on Freddie Mac Foreclosures.

Foreclosure - Forced sale of property ordered by a lender due to delinquency in mortgage payments. A foreclosure sale terminates all rights of the mortgagor.

G

G.N.M.A. - Government National Mortgage Association affectionately known, as Ginnie Mae is an agency in the secondary mortgage market dealing primarily in
recycling VA and FHA mortgages. Grantee. The buyer.

H

HUD - Abbreviation for the Department of Housing and Urban Development, an agency that oversees FHA. FHA foreclosures are called HUD Homes.

I

Institutional Lender - Financial institutions whose loans are regulated by law such as banks, credit unions and commercial loan agencies.

Involuntary Lien - A lien imposed against property without the owner's consent such as taxes, special assessments, federal income taxes, etc.

J

Junior Lien - A lien that does not have first priority making the property security for payment of a debt.

L

Lien - An encumbrance using the property as security for the payment of a debt or obligation of the property owner.

Lis Pendens - Lawsuit pending. This usually recorded in Florida to give constructive notice of pending litigation.

M

Mechanic's Lien - A lien placed on property by laborers or material suppliers who have contributed to an improvement.

Mortgage - A legal conveyance of property to a creditor for security (from the Latin meaning death pledge).

Mortgagee - The lender.

Mortgagor - The borrower.

MLS - Multiple Listing Services run by local Realtor associations.

N

Notice of Default - A notice filed to show that the borrower under a mortgage is in default.

P

Points - A charge made by the lender for loaning money. One point equals one percent of the loan.

Portfolio Loan - Loan originated and held 'in house' as part of a lender's investments.

PMI - Private Mortgage Insurance required as part of the monthly payment in loans less than 80% loan to value (less than 20% down payment).

Pre-foreclosure - Period between when a borrower becomes delinquent and the property is foreclosed upon.

Principal - A person acting for him/herself in a transaction. Also the amount of a loan exclusive of interest.

Q

Qualifying - Process of demonstrating a person is credit worthy and has enough money to buy a property. Institutional sellers may require "proof" in the form of a
letter from a lender or some verification of the source of funds if the sale is cash.

Quiet Title - Legal process to eliminate title problems.

Quitclaim - A form of deed in which the grantor is giving the grantee rights to a property but makes no warranties about rights others may have.

R

Realtor - A broker or sales agent who is a member of a local real estate board affiliated with the National Association of Realtors.

R.E.O. - An abbreviation for Real Estate Owned most commonly used to describe properties acquired in foreclosure and owned by institutions.

Right of Redemption - Right to buy a property back for a limited period of time (usually 10 days) after a foreclosure sale.

S

Secondary Mortgage Market - Fannie Mae, Freddie Mac, Ginnie Mae were originally chartered by the federal government to stimulate the economy by either
buying or recycling packages of loans from financial institutions.

Sheriff's Deed - Deed given by court order to satisfy a judgment.

Short Sale - In some instances in Florida a lender may agree to adjust the amount owed in order to get the property sold.

Special Warranty Deed - See warranty deed. "Special" indicates there are limitations.

T

Title - Evidence that an owner is in lawful possession; instrument evidencing ownership.

Title Insurance - Policy written by a title company to protect a property owner against loss if the title is imperfect.

Title Search - Process to determine validity of the title to real estate.

W

Warranty Deed - Assures the title conveyed is good and possession will be undisturbed.

Brokers, Agents And The Foreclosure Market
by Todd Beitler / Broker Agent News 10.4.03
Brokers and Agents should take a good look at the foreclosure marketplace for several reasons, not the least of which is to broaden the range of services they offer and enjoy increased sales.

Consumers are fascinated with the concept of saving money on their home purchase. That's why they seek information about foreclosed properties.

The perception is that they will save money. This isn't always true. Not all foreclosures are deals. Regardless, the same consumer has expressed an interest, need or desire to purchase a property, and whether they buy a foreclosed home or not, they still need to purchase a property. This creates several opportunities for the wise broker/agent.

The plain truth is that most foreclosed homes are now sold by brokers/agents representing the lending institution that foreclosed the mortgage or trust deed. Why is this? Over the years, lenders have learned that the regular distribution channel for real estate sales is still the best. In other words, selling their foreclosed property inventory through brokers/agents is the fastest, most economical way for lenders to dispose of these properties.

How does this help you? First, by letting your customers know that you can show them foreclosed properties only adds to your collection of real estate services offered. Second, many of these homes are listed and ready to be shown immediately. Because these are "post-foreclosure" properties, they have no liens, encumbrances or other issues that may cloud the title. Therefore, they are RTG (ready-to-go). As a matter of fact, these properties should be mixed in with your regular inventory and shown as such. The only difference between these properties and other resale's is that the lender had to force a foreclosure proceeding for non-compliance with the mortgage or trust deed. Typically, this means non-payment of the loan as stipulated in the borrower's agreement.

Most foreclosures will be sold at market value. That's because the lender has authorized the repairs (typically, little more than paint, carpet and some cosmetic work) and through a broker's opinion of price and market value, has determined that the property, in good condition, will bring fair value. Other properties may need more work. The real dogs, the worst of the worst, will be wholesaled to investors. These properties rarely make it to the general public.

The free real estate magazines available in supermarkets and convenient stores are filled with ads from brokers/agents offering foreclosed properties. These brokers/agents have learned the value of offering these properties long ago. If nothing else, these ads bring buyers into your office that you otherwise might not reached before. There is hardly a broker/agent alive today, that hasn't been asked about foreclosed properties from prospective buyers.

There are no special requirements necessary for selling lender-owned properties. The seller's representative (a local brokerage) will offer these properties for sale and you will participate in the transaction as you would with any other home purchase/sale, new construction, resale, foreclosure or other.

Regulations regarding the sale of government-owned properties have changed frequently in the last few years. To make sure you're up-to-date on the latest changes, please visit hud.gov for HUD-owned properties and va.gov for VA-owned properties.