There is a lot of confusion about bank owned properties. Do you have to have 10% of the purchase price in cash? Are they sold in an auction? Are you able to see the house before bidding?
A lot of these questions are more specific to foreclosure auctions. What people may not know is that bank owned properties come on the regular MLS all of the time. Yes, you can walk through these houses with a REALTOR before purchasing the house. Most normal mortgage programs will finance a bank owned house but conventional is a safer bet.
So, how do these sales compare to the regular market and should you be taking advantage of them?
Number of Bank Owned Sales
First of all, it's important to know the short hand REO. It stands for Real Estate Owned and it means that the bank owns the real estate as a result of foreclosure.
As you can see, REO sales make up a very small percentage of real estate sales in our local market. Of the sales represented above, REO sales account for 5% of all sales. So what does this scarcity do to the price of REO properties?
Median Sold Price
Over the past three years, REO properties are selling at 41% under the regular market. Keep in mind, bank owned properties often require repairs and updates. This means you need to analyze any potential deals for the repairs that need to be done and the future valuation.
In my experience, an REO will either be priced low and the price gets bid up above asking price or it will be priced high and buyers will make low offers or it will reduce in price. This is very similar to pricing regular homes but banks will price their homes on varying factors that often don't align with true market value.
Now, how do the discounted prices of REO properties effect how long they stay on the market?
Days on the Market
As you can see, REO properties do sell faster than the regular market. Obviously this will very from case to case but in my experience, when a bank owned property is priced low the property will usually sell quickly and above asking price. When the property is priced too high, the house will sit on the market for a while and likely have some price reductions.
REO properties can be a great way to find a good deal on the house, if you are familiar enough with housing to accept the risks that come a long with them. They are always sold as-is. Which means, you can do an inspection on the property but it is only for your information and the bank will not make repairs.
If you are not very experienced in housing and don't know potential risk and pitfalls, I would either avoid bank owned properties or be have a team of experts help you know what you are potentially purchasing.
If have any questions, want to know what REO properties are currently on the market, and/or would like to receive alerts for any future REO listings, email or call me.