What Is an REO Property, and How to Buy One?

 

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Distressed properties can be a very attractive option for both homebuyers and investors. Yet when faced with the hustle and bustle of a foreclosure auction, some buyers can find themselves overwhelmed. Often, dealing with the bank directly can allow you to pace your home buying decision and even provide a better deal. This is where REOs come into play.

What Is an REO Property?

Real estate-owned (REO) properties, also known as bank-owned, are properties that have not sold at a foreclosure auction, and as a result, they are owned by the foreclosing bank.

Before a property becomes an REO, it goes through several stages:

  1. Payment default: the owner of the property fails to make a payment on their mortgage loan. If 90 days go by and the owner has yet to resolve the overdue payment, the bank will send out a Notice of Default and a lien will be activated on the property.
  2. Foreclosure: the bank will begin the legal proceedings against the owner and the property will go into foreclosure.
  3. Auction: once the foreclosure is concluded and the owner’s delinquency is proven in court, the bank will try to recuperate the owed amount by listing the property at a public auction.
  4. REO: if the property is not sold at the auction, it will be added to the bank’s inventory and will be classed as a bank-owned or REO property. From there, the bank will collaborate with REO specialists and real estate agents to sell the property.

Buying an REO Property

Broadly speaking, buying an REO property is similar to buying a home from a private owner. You will still need to check MLS listings, research the local market, consider your financing options, obtain an appraisal and inspection, make an offer, negotiate and close the deal. However, there are some differences.

With REO, you’re dealing with an institution

This means that making decisions and waiting for a reply will take longer than when buying from a private owner and even cause delays that come with hidden costs.

For example, banks often require you to sign an addendum to the contract, in which they stipulate clear terms for the purchase, such as the fact that the property will be sold as-is. Yet, the addendum can also specify that the sale must be closed by a set date. If the sale is not closed by then, you can find yourself paying a fee. The best way to avoid this scenario is to get pre-approved with the lender selling that property.

Negotiating the price will be trickier

Banks often sell REOs at discounted prices and are less inclined to lower the price. Even if your offer is taken into consideration, it can go through a lengthy approval process.

Most banks will clear any liens on the REO property

In addition, they’ll also provide you with a general warranty deed pledging that you will own the home free of any legal issues or claims, such as outstanding liens. However, in some cases, banks will only provide a special warranty deed, which means they can’t guarantee against any liens prior to the bank owning the property. Ideally, you should hire a company to run a full title search before closing to avoid unpleasant surprises.

Are REOs Worth It?

The main appeal of real estate-owned properties is that they can be a better deal than buying from a private owner. When a property fails to sell at an auction, the bank is at a disadvantage, and in order to recover its costs, it will aim to encourage buyers by offering discounted prices.

Buying an REO is also less risky than buying a home at a foreclosure auction. For example, you can visit the property and get a better idea of the condition it’s in. You can also request a home inspection, which is rarely an option for auctioned properties, or when it is, it comes with strict limitations.

On the flip side, the main drawback to an REO property is the fact that it’s sold as-is, which often means it will need extensive repairs. Admittedly, it’s in the bank’s interest to sell the property, and some banks will make repairs to ensure that the property is livable. But this isn’t always the case. Also, the bank will not pay for any repairs on REO properties that you wish to do yourself, so remember to factor in this extra cost.

If you’re considering buying a bank-owned property, it’s always best to work with a real estate agent who has experience with REOs. Not only will they help you find the best properties and best prices, but they will also advise on how to structure an offer, help calculate the cost of repairs and streamline the process of buying an REO as much as possible.

 
 

8 Resolutions to Get You Into a New Home in the New Year

It’s hard to believe it’s almost the New Year! With 2019 coming to a close, undoubtedly you’ve started coming up with resolutions for 2020. If one is to buy a new home in the South Okanagan, this post is for you! Below you’ll find a list of eight things to do before you purchase your new house.

1) Decide What You Want 

This is the fun part! I recommend making a list of “must-have” and “would-be-nice” things you hope to have in the home. That way, if you can’t find one with everything you want, you’ll at least know exactly what it has to have. Questions to consider include:

 

  • What kind of house do you want?
  • What neighbourhood?
  • When do you want to move in?
  • Are you going to be expanding your family?

2) Get Your Finances Figured Out  

Once you know what you want, it’s time to consider what you can actually afford. Have you saved up for a down payment? What can you handle as a monthly budget? Will you have enough for the closing costs and taxes? Can you afford all the hidden costs of home ownership? There’s a lot of questions here and it’s important to buy something that isn’t outside of your means.

3) Find a Real Estate Agent 

I hear that Dan Jones guy is pretty great.

4) Find Your New Home 

Alright, back to the fun stuff. Now it’s time to go out and start looking at houses. Since you made that handy-dandy list in step #1, you and your real estate agent (me!) can start sorting out potential homes. Usually you’ll want to look at several before making a decision but who knows? You might get lucky on the first try.

5) Talk to a Mortgage Broker 

Truthfully, you could have done this as part of step #2. Talking to a mortgage broker isn’t as intimidating as it seems. They’re there to help you get the home you want but that’ll all depend on your credit rating. It’s worth talking to a few to see who can offer you the best rate.

 

 

6) Make an Offer 

Here’s where it gets interesting. When you’ve found the home you want, you’ve got a few options:

  • Accept the listed price
  • Reject the price and don’t make an offer
  • Suggest different terms and make a counter offer

How effective option number three is depends on the real estate market in your area. If it’s slow, you might be able to make an offer lower than the listed price and save some money. But if you’re in a hot market, prepare to potentially offer MORE than what the seller is asking for. What you offer will also be determined by the condition of the house. Usually you’ll have a home inspector come in to look things over. If they find potential problems (old furnace, damaged roof, etc.), you might be able to decrease the amount you offer. Again, as your realtor, I can help you figure out this step.

7) Get Insurance 

This is easy. You need it. Check out a few different places for the best rate.

8) Close the Deal 

Prepare to sign a LOT of papers. This is the step where all the I’s get dotted and the T’s get crossed. Once everything’s all signed up, you’ll get the keys. Then it’s time to start moving in!

 

 

 

 

 

 

 

There’s one last step… have fun! Sure, there’s a lot of responsibility that goes along with home ownership but it’s an incredible experience. If you want some help buying a home and are looking for a realtor in Penticton, get in touch with me. I can walk you through the process and get you into something you’ll love!

5 Tips for Reaching your Financial Goals in 2020

The New Year is an exciting time for fresh-starts, new aspirations and of course, New Year’s resolutions. A great 2020 objective could be finally reaching your financial goals so you can be in a better position to travel, purchase a new vehicle and yes, invest in real estate. It’s never a bad idea to start learning effective ways to save money and what better time to begin than the start of a new year?

Keep Track of your Expenses

No matter which way you choose to track your spending, it’s a smart idea to document your finances so you have a better indication as to where your money is going and how to create an accurate budget. Consider using apps like Mint or Penny. Each app links to your bank accounts and will help you understand your money spending habits and what you can improve on. If you choose to refrain from technology to track your habits, keeping a written “money” journal is an effective tracking method as well.

Set Small Goals

Great saving tips start with setting realistic financial goals. Chances are, you have larger aspirations in mind like buying a home, saving for retirement or having an emergency fund however, setting small goals is a great way to get yourself to where you want to be. Perhaps your smaller objectives could include paying off a credit card or having $1000 saved by the end of the year; both great places to start. No matter your goals, setting small targets is a great way to get yourself into a stronger economic situation.

Reduce Debt

Reducing debt is arguably the most important part of the financial process because once you’ve reduced or completely paid off your balance owing, you’ll be able to put aside more cash into a savings account. Also, reducing debt helps you reach your larger financial goals like buying a home. When applying for mortgage approval, one of the first things a broker looks at is your debt to income ratio. If you have high credit card debt or other loans in your name, this may hurt your chances at being approved for a mortgage.

Open Up a Separate Account

If you have a savings account linked to your existing chequing account and are a person who tends to spend their saved money, consider opening up a separate bank account strictly for savings. By not seeing your savings balance, you may refrain from reaching for that extra cash. Sometimes, the quote “out of sight out of mind” can actually prove extremely effective, especially where finances are concerned.

Create a Realistic Budget

When looking for money saving tips, creating a realistic budget you’ll actually be able to stick to is imperative in achieving your economic goals. Map out what you make each month (and/or every two weeks) and what expenses you pay each month. Be sure to include items like gas money, groceries, and entertainment as well as any utilities you have. Once you’ve done that, plan out how much money you can afford for debt reduction and of course, savings. This will help with your financial goal setting.

Buying a home is a smart investment decision but in order to do that, you need to ensure your finances are in order. By making the smart New Year’s resolution to reach your financial goals in 2017, you’ll fast track your way to increasing your equity and improving your future. If you’re ready to purchase a house, let’s talk real estate – contact me today.

Keeping Clients Out of Hot Water Over Groundwater Licencing

Droughts, water restrictions and wildfires have all become part of a typical BC summer, just like Okanagan cherries or a BC Day barbecue. Despite all of BC’s lakes and rivers, the truth is that water scarcity is a serious concern. That’s why the provincial government introduced the Water Sustainability Act in 2016, which requires anyone diverting and using groundwater for non-domestic purposes to apply for a groundwater license by March 1, 2022.

Groundwater licensing & REALTORS®
If you have a client who uses groundwater for non-domestic purposes but doesn’t apply for a water license by March 1, 2022, they risk losing their right to access groundwater on their property. As a REALTOR®, you can add value to your clients by making sure they understand this requirement and how to apply for their license.

How groundwater licensing works
The groundwater licensing requirement came into effect on February 29, 2016. But that doesn’t mean it only applies to anyone who began using groundwater after this date-it applies to everyone. If you were a non-domestic groundwater user on or before February 29, 2016, you will submit an existing use licence application. If you were a non-domestic groundwater user on or after March 1, 2016, you will submit a new use application.

The deadline to apply is March 1, 2022 and the government is waiving the one-time application fee to people who submit their application on or before this date.

What about domestic users?
If you use groundwater for domestic use in a private home, you do not require a licence. However, as a REALTOR®, you should encourage your clients to register their well, if they have one. By registering their well, they create a record of their water use, which helps ensure it’s considered by the decision-makers dealing with other licence applications.

How to apply for a licence
For information on how to apply or to submit an application for groundwater licensing or register a well, please visit the Province’s Secure Your Water Rights Today portal. FrontCounter BC has also recently published a useful webinar on how to submit an application for an existing use groundwater licence.

Posted by
April van Ert

What to do if a seller leaves behind  a lot of junk when you move in?

WHAT TO DO IF A SELLER LEAVES BEHIND JUNKS WHEN YOU MOVE IN?

This situation while regrettable does happen from time to time. Here’s some suggestions on what you – the Buyer – can do.

Take pictures of the items that need to be removed.

Get an estimate from a contractor for removal (there are several companies in the Okanagan) Appleton Waste Services 1-800-663-5117, 1-800-GOT-JUNK (1-800-468-5865) or some waste management companies

Contact your REALTOR® and ask if they can contact the Sellers REALTOR® to discuss the situation and requesting a contribution to the invoice for removal. Give a deadline for response noting that an option may be to file a claim in BC Small Claims Court.

If no response is forthcoming then proceed to file a Claim in BC Small Claims Court Start Here