REAL ESTATE TOPICS...How to find out when a lender will put an REO home on the market

By Ilyce Glink and Samuel J. Tamkin

A house we are interested in was sold at a sheriff’s auction. The big box lender bought it back. How do you get information on when the house will be sold by the bank, or how do we contact the bank to let them know that we are interested in buying house?

It seems to be a big dark secret when it comes to getting any information from big box lenders. Everyone always wants to know when a lender’s real estate owned (REO) department will put a house up for sale, but it’s quite hard to get that information from the lender directly. We don’t know why lenders are so secretive about this information, but we’ve found that the only real way to obtain information about upcoming properties for sale is to know the real estate company and agents that the big box lender uses to sell these properties.

Let’s start at the beginning: When a homeowner fails to pay his mortgage, the lender has the right to foreclose on the home. Depending on the state in which the property is located, the lender may have the right to sell the home at a sheriff sale without a court judgment. In other states, the lender would have to go to court and get a judgment against the borrower, with the home eventually sold at a sheriff sale.

In either case, the likely outcome would be that a potential homeowner looking to purchase a distressed property could purchase the home at the auction or other similar sale. If the sale does not find any buyers, the lender bids what it is owed on the loan and gets title to the home. Once it has title, the lender can market the home for sale and even list the home for sale in the local multiple listing services.

That’s why it’s important to find out the name of the real estate agent or real estate company that represents the big box lender and see when the home will go on the market. If there are other homes in the neighborhood that were also sold at auction and associated with the same big box lender, you might want to call the listing agent of those homes and see if they know more about the property you are interested in.

If you don’t have much luck finding the agent, you might try talking to real estate agents who work in that neighborhood. Those agents may know the company that specializes in sales of REO properties. Frequently, brokers in the area know who the real estate agents are that specialize in REOs. Again, the real estate agent you find can help you with the purchase or you can try to get to the REO agent directly.

Finally, we should caution you that buying an REO property isn’t always the same thing as buying a property that is listed on the market by caring homeowners. Many REO properties have significant issues, and you should be careful if you decide to buy an REO home.

Typically, if sellers go into foreclosure, they’ve been broke for some time. Commonly, you see that foreclosed owners do not care for the home during the last months they lived in the home. So, you could have plumbing problems, mold issues, broken appliances (or missing appliances) and deferred maintenance issues that could cost you dearly. And, we’ve seen and heard of cases where pipes have frozen and caused huge issues in homes, roof leaks that weren’t repaired, so be very careful and plan for extra expenses.

Good luck in your quest to find the broker that may list the home and in the home buying process.