Written by Stephanie Kelley, Real Estate Professional in San Antonio
This excellent article is compliments of Stefani Romer, EPro. Stefani works for Old Republic Home Protection, a major provider of home warranty (protection) insurance.
Article Take Aways:
(1) REO purchases are riskier than usual real estate deals.
(2) The buyer should be prepared for higher repair and maintenance costs when buying a REO property.
(3) The buyer should consider asking the REO seller to furnish a 1 year home warranty protection plan.
Here's the article:
Prepare for Unexpected Risks When Buying A REO
Have you ever bought a “mystery gift” from a catalog company? That is when you purchase a surprise package containing, say, $100 worth of unknown items for only
$50. You have no idea what is in there, but you know it is a good deal. Buying an REO can be a lot like that.
When purchasing an REO (bank owned) property, there can be a variety of risks. Often times the utilities were not turned on prior to the close of sale, so the true condition of most of the home's systems and appliances is unclear. For that reason, the buyers may need to set a larger repair budget to cover any problems discovered when the utilities are turned on and the systems and appliances are tested for the first time.
There are also times when the buyers have a pretty good idea of the condition of the home because the utilities were on and a thorough inspection was performed. In those instances, the repair budget is more accurate.
Whether or not the buyers clearly know the condition of the home and its systems and appliances, they have set the purchase price knowing that there will be some additional out-of-pocket expenses necessary to make the home livable. There has been a “budget” set for the repairs and renovations needed in the first few weeks and months after taking possession of the property.
One can plan for what is known or anticipated. The tough part is when the unexpected happens - the heater stops working three months after close of sale, the shower valve in the master bathroom malfunctions, or any other problem that can occur in the first year of home ownership.
What happens next? The “budget” has been spent and now the buyers are facing an expensive repair with a pretty slim bank account.
Plan ahead and be prepared. Be sure to protect your own investments and those of your clients by including a home warranty on all REO transactions. More banks are willing to pay for them today, and on those occasions when they won't, be sure the buyers include them even if they have to pay for it. The home warranty is more than worth the money if a major system or appliance needs to be repaired or replaced.
For more information on the value of including home warranties on all your REO's or to order home warranties for your current transactions, call your local Old Republic Home Protection Account Executive.
Stefani Romer, ePRO
Sr. Account Executive
(800) 282-7131 Ext. 1377
StefaniR@orhp.com
Do you need San Antonio realty advice or assistance? You can contact me at swkrealtor@aol.com, visit my website at sanantoniohomequest.com or blog my realty services team at http://sanantoniorealestate.blogspot.com and http://www.trulia.com/blog/stephanie_kelley .
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