Lender-Owned Homes May Be Bargains, But They're Hard to Buy

Investor's Business Daily (04/11/08) P. A8; Doler, Kathleen
While many investors and home buyers view real estate owned (REO) properties as bargains, experts note that it is difficult and time-consuming to purchase a foreclosed home. Jim Richman of the Glendale, Calif.-based real estate and debt restructuring firm Richman & Associates says approval from secondary-market owners and private mortgage insurers are needed before lenders can unload foreclosed homes--a process that could take as many as 48 days, with a month or two required for escrow. Richman believes the lengthy process is causing REO inventory to pile up, and he predicts the federal government will need to take action to reduce inventory. "All of these lenders are acquiring more and more property in their REO section, and they're taking reserves for that. But then they'll use up all their reserves and have no money to lend." Experts point out that prospective buyers must carefully craft an offer that is reasonable and complies with paperwork requirements, adding that they must also contend with the need for hefty escrow reserves to cover property damage and deal with delays caused by utility and homeowner's association liens.