Buyers and even buyer’s agents often call BankOwnedBids.com with questions about buying foreclosed homes. The process of purchasing from a corporation (REO, which stands for real estate owned) is very different than buying from an owner occupant (retail).

If you are a buyer, you will like the discounted REO prices, but you may worry about the condition of the property you’d like to buy. Here are some tips to explain the process, protect yourself from expensive surprises, and reduce your stress and worry in buying a foreclosed home.

•  First, find a real estate agent to represent you. The best choice would be a Realtor with experience in foreclosure transactions. They will look after your interests, explain the process, help with the paperwork and advise you on how much to offer. The representation is free to you because the seller pays the buyer’s agent commission.
• Be sure to visit the property yourself to evaluate it and the neighborhood. It would be wise to talk to the neighbors and drive through the area at different times of day. 
• To figure out the value of the property, your agent will show you similar properties in the same neighborhood that are listed or sold.
• Unlike most retail sales by owner-occupant sellers, bank-owned properties are sold ‘as is.’ The corporate seller is exempt from disclosing details about its condition because the seller has never lived in the property. That means that you and your agent are responsible for gathering the facts you need to make an informed decision.
• The listing office will have on file the city presale inspection, if the municipality requires it. If your offer is approved, know that before closing, you will have to take the presale inspection to the city’s building department and sign a statement that after the transfer of ownership, you will be responsible for fixing any problems cited.
• Find out what the property taxes would be upon transfer of ownership.
• Your agent will be able to estimate what your closing costs will be.
• Your agent should also advise you about government incentives for first-time buyers and for making homes more energy efficient.
• Understand that getting a seller’s response to your offer will take longer than if you were dealing with an owner occupant seller. In REO, you are dealing with a corporate employee who is responsible for offers on hundreds of properties. Sometimes offers need to get approvals up the ladder and between corporate entities. Typically, you’ll get the corporate seller’s response to your offer within three to five days, but it may take longer, depending on the bank. You won’t fret or be impatient if you know going in that it will take time to get an answer.
• Put into your purchase agreement a clause that allows five to 10 days after acceptance for inspections, without risking your earnest money deposit. After your offer is accepted, but before the purchase agreement is executed, hire a private inspector to find hidden problems. In Michigan, it is likely that the inspector will charge between $150 and $350, with an average of $200. Professional testing for mold, carbon monoxide and radon will likely cost more. However, it will be the best money you ever spend.
• Get an estimate or two on how much it would cost to bring the property up to the city’s standards and yours.
• Closings are usually within 30 days, although cash deals often close more quickly.
• The seller chooses the title company.
• The corporate seller ensures that the property will be sold with a marketable title. There will be no outstanding taxes, water bills or liens.
• Finally, if the house you are buying is eligible for a home warranty, buy the protection and extend it for the entire time you own the home.

If you are fully informed about the REO process, you will know what to expect and what you need to do. These steps would be valuable in buying retail, as well.