The two most common ways of purchasing repossessed properties are through a real estate agent or via a public auction of the property. Another term for a repossessed property is "real estate owned" (REO) property, since the lender already owns the property because the previous owner failed to pay off the loan. Purchasing an REO property is typically an affordable housing option, according to Bank of America.
The following shows the steps involved when purchasing a repossessed property, as stated on the Bank of America website.
- Determine budget limits
- Search for REOs
- Hire a real estate expert
- Inspect the property
- Do a title search
- Purchase the property
The first step for the buyer is to determine what type of home can comfortably be afforded. The cost of the home, including mortgages, property taxes and insurance, should ideally be within 36 percent of the buyer's income.
After determining budget limits, the buyer should then start looking for REOs. The search can be done through the Internet, auctions or via a real estate agent.
It's a good idea for prospective buyers to enlist the help of real estate specialists. These professionals can help buyers with the paperwork, make informed decisions and in the process of buying the property.
Hiring a certified home inspector to check the condition of the home will help determine the cost of repairs and for the buyer to make a reasonable offer.
Conducting a title search will reveal any liens on the property and verify that the deed to the property is correct.
Real estate professionals can guide the buyer through this process.