4 Mistakes to Avoid When
Buying a Bank Owned Property (REO)

BY CORY A. LEVINE, ESQ.​


​An REO (Real Estate Owned) is real property owned by a Bank after a foreclosure auction.

Buying an REO is different than buying a house from an individual. You can purchase an REO at a good price, but it can be risky if you do not take the right steps.

Here are 4 mistakes to avoid when buying an REO:

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1. Not having the right dates in your offer.

The Seller-Bank in an REO transaction will want to close quickly. However, it is important that appropriate Mortgage Contingency and Closing dates are properly negotiated to avoid timing penalties or default. You should discuss timing with your Real Estate Attorney before you present your offer in writing.

2. Using the wrong Lender/Loan Product for financing.

Certain Lenders and Loan Products are not good matches for an REO transaction. You should discuss the Lender & Loan Product with your Real Estate Attorney before you present your offer in writing.

3. Not reviewing current Building Department Approvals in advance.

Standard real estate transactions usually require the Seller to procure any needed Building Department Approvals.  However, REO transactions usually require the Buyer to procure these approvals. You might be willing to assume this responsibility, but you must also consider contract timing penalty/default provisions.  You should perform an investigation in the Town's Building Department, etc. before you sign an REO contract.

4. Using the wrong Attorney.

REO contracts usually cannot be changed and have unusual and strict requirements that the Attorney will need to be familiar with.  Buying an REO requires a Real Estate Attorney who is very experienced, comfortable with and knowledgeable about REO transactions to protect and guide you properly. ​