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What is a Naples REO?

REO Property stands for Real Estate Owned. Owned by the Bank or the Lending institution. In other words, a foreclosure property. Read about the Naples Foreclosure process on my "foreclosure process" link.

How to buy a Naples REO or a Naples foreclosure home or condo?

Buying a foreclosure home in Naples Florida is a completely different process than a traditional transaction between a buyer and a seller. When purchasing a bank owned property there are few things to take in consideration:

  1. The list PRICE of the property is typically less than the market value, which means less than any comparables in the area. Usually a bank or a lender will order a BPO( broker price opinion) prior to listing the property through a local REO agent. About 75% of Naples foreclosure properties sold in the past year at or above the asking price. In many cases banks receive multiple offers on the same foreclosure property and they start, what is called a "Highest and Best" period. this period gives all bidders a chance to come up with their best offer in a certain time frame.
  2. TIME: the time of acceptance of the offer may not necessary be followed by the seller. Therefore it is best to submit an offer with at least 5-7 days time of acceptance. The closing date should be specified clearly in the contract.
  3. FINANCING: a CASH offer will always have priority over a financed offer even if slightly lower than the financed offer. When financing the purchase of a foreclosure home, we recommend an offer with the purchase price about 4-5% higher that the listing price but with a 4-5% concessions towards buyer's closing costs. When using an FHA loan or A USDA loan to purchase a Naples foreclosure, it is recommended to even raise the price to 6% above the asking price. Some of our clients were able to purchase $140-$150,000 homes with less than $3700 down.
  4. APPRAISALS. When financing the purchase of a Naples foreclosure home it is very important that the buyer's agent understands the market very well and know what offer to submit in order for the property to appraise. A very important issue is also weather the property will qualify or not for a certain type of loan. In this market it is not sufficient for the buyer to qualify for a loan, the property itself must be suitable.
  5. CONTRACT. The type of contract used to make an offer for a foreclosure home in Naples or Bonita Springs is a standard FARBAR AS IS, which is a Florida Association of Realtors AS IS contract. What does AS IS mean? It means that the property will be purchased in as is condition with all faults and defects.
  6. ADDENDUM. However, the bank or financial entity reserves the right to have the contract resubmitted on their own legal contract. So, once the offer is verbally accepted by the seller, the buyer must complete a new contract called "the Addendum" which spells out all that has been negotiated in the terms needed by the bank.
  7. INSPECTION. The purchase of a foreclosure home in Naples or Bonita Springs gives the buyer the right to inspect the property. A typical inspection period is 5-7 days, the shorted the better for the bank. A property inspection can be general inspection, mold inspection, termite inspection, radon gas, sewer, septic, water etc. An inspection is always conducted by a professional inspector and the fees are paid by the buyer. At the completion of the inspection and no later that the inspection period noted in the contract, the buyer may decide that the property is not suitable enough and terminate the contract. A termination letter will be prepared by the buyer's agent and the sellers will refund the Escrow Money Deposit to the buyer.
  8. ESCROW MONEY DEPOSIT. Once an offer is accepted, the buyer is obligated to deposit a sum stipulated by the contract into a Title Company's Escrow account. This money will be credited at closing or returned if the transaction falls through. Escrow money deposit is also called earnest deposit or EMD.
  9. TITLE CLOSING COMPANY. The closing will be handled by a Title Company or an Attorney. When purchasing a foreclosure home in Naples or Bonita Springs, the bank will always choose the Title Company. The bank will also pay for the title search and for the title insurance. Should a buyer require, they can retain the services of an attorney to represent them during the closing process.
  10. TITLE. It is the seller's obligation to provide a clear title to the property, The Seller usually performa due diligence in clearing the title of any leans and encumbrances.
  11. DEED. When the title of a property is transferred from one owner to another, the written instrument is called a Deed. The type of deed transferred at the sale of a foreclosure property is usually a special warranty deed which means that the seller warranties the title only during the time they owned the property.
  12. TITLE INSURANCE. It is customary in the State of Florida that the buyer's will be issued a title insurance. So if any defects will ever be found in the chain of title the buyer is insured. This is piece of mind when purchasing a foreclosure property.
  13. CLOSING AND POSSESSION. When purchasing a foreclosure property, in many cases the closing time and the possession time might not coincide. The buyer will take possession of the property as soon as the bank's attorneys will confirm that the full funds have been received.

Click here for all Naples FHA approved condo communities.

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