Repo Homes

Repossessed homes or repo homes are houses taken over by taxing authorities, by law enforcement or by the bank. If a house does not get high enough bids at the auction to cover what the lender is looking to get for it, it is turned over to the lender.

It becomes Real Estate Owned by the lender (REO) and is then available for sale by the lender. The pitfalls to buying foreclosure houses in this manner are as follows:

1. You'll need to have proof that you have the funds for the down payment and the closing costs. You'll also need proof that either you've been pre-approved for a loan for the balance or that you have enough money to pay the balance.


2. The house will be sold at fair market price. The bank is trying to get as much money as it can for it, so they'll usually get Broker Price Opinions from real estate brokers to help them price the home to as near fair market value as they can. Don't expect to get a bargain by buying at fair market value.


3. You cannot inspect the house's most expensive items and all sales are final. Most of these houses have been vacant for quite a while so the power has been shut off. There's no way you can inspect the electrical system, the plumbing system or the mechanical systems (heating, ac, etc) when the power is turned off. Then to top it all off the house is sold with no warranties so there's nothing you can do if the house later turns out to be contaminated or has any failing systems.