Buying an REO Home
Buying an REO starts with finding the listing and confirming how it is titled, then inspecting the property and reading the lender's contract before you offer. The house is usually sold in its current condition, so the work it needs is part of the price.
Step by step
Find the listing
REO properties are marketed through brokers, the MLS, and sometimes asset managers or auctions. Ask a local agent what is active and what is coming.
Confirm title and liens
The lender typically removes liens before resale, but you still want a title search and title insurance. Ask your attorney what the title shows.
Inspect the property
Bring a home inspector and the specialists the house needs. Expect deferred maintenance, and check for water intrusion, roof condition, and mechanical systems.
Read the contract and addenda
Lender contracts vary. Look at inspection rights, repair obligations, deadlines, and what happens if the deal falls through.
Confirm financing
Ask your lender what condition the property must be in for the loan, and whether any repairs must be completed before closing.
Close
Coordinate utilities, final walk-through access, and closing details with your attorney and agent.
What to check on a bank-owned house
- Utilities. Water, gas, and electric may be off. Ask how they can be turned on for inspection.
- Water damage. Look for stains, swollen trim, and musty smells, especially after the house has sat vacant.
- Systems. Heating, plumbing, electrical, and the age of the roof and water heater.
- Missing items. Fixtures, appliances, and even copper piping can be missing from a vacant property.
- Permits and additions. Ask whether past work was permitted; unpermitted work can complicate a sale.
- Insurance. Vacant or damaged homes can be harder to insure. Get a quote before you commit.
Repairs and the offer
Price the work, not just the list price. Get contractor estimates for anything significant, and decide in advance what you are willing to fix and what would make you walk away. If the lender will not repair an item, that cost belongs in your offer math.
Frequently asked
How do I buy an REO home?
Find the listing through a broker or the MLS, confirm how the property is titled, inspect it, and read the lender's contract and addenda before offering. Plan for repairs and for utilities that may be shut off.
Can I inspect an REO home before buying?
Inspection rights depend on the lender's contract. Ask before you offer, and bring the appropriate inspectors if access is allowed.
Will a lender pay for repairs?
Sometimes, but it varies by lender and contract. Ask what the seller will and will not repair, and price the work you would have to do yourself.
Can I finance an REO purchase?
Often, but the property's condition can affect loan approval. Ask your lender what condition the house must be in and whether repairs must be completed before closing.
This page is general information, not legal, tax, or financial advice. REO contracts, title, and condition issues should be reviewed with a licensed New York attorney and the appropriate inspectors.
Want a second set of eyes on an REO?
Send me the listing and I will tell you what I would verify before you write an offer.