RE/MAX Austin Skyline

Bank Foreclosures and Distressed Properties
What buyers should know before purchasing

After a property is foreclosed on by a mortgagee it then gets listed for sale by a broker who specializes in what is called REO (Real Estate Owned) property. (This is not in reference to government foreclosures or HUD properties which is an entirely different process in regards to purchasing.)

REO properties are sold AS-IS and in most cases have special addendums that must be signed along with the contract offer. AS-IS means that the seller (bank) will not pay for any repairs; however, some banks will re-negotiate the price if an urgent repair is needed and it effects the value, and if it is brought to their attention “before” the option (inspection) period ends. Usually banks will allow a five-day inspection period, and some seven, but no more. Despite the properties being sold AS-IS, it is always recommended that you get an inspection to understand what you are purchasing. Home warranties are not usually paid for by the seller.

When submitting offers be sure to include either a pre-qualification letter, pre-approval letter, or proof of funds if a cash offer, as well as the earnest money check. Assignees are never allowed on offers. Note that the Texas property code does not require the seller to furnish a seller's disclosure notice (form stating defects or repairs needed), making another reason to get an inspection.