There seems to be an abundance of misinformation about what it takes to purchase an REO property; the time involved, the paperwork, as well as how many people are part of the acceptance process. The job of the buyer’s and seller’s agent is to facilitate all of the required tasks, inspections, photographs, additional inspections, contracts, financing and more on behalf of the buyer and the seller, known as “the client.”

We thought it would be helpful to explain these steps. You can click here for a larger version of the featured image above. But before we get to the list, let us explain a bit about REO and why it could be good for the buyer – and the banks. REO means “real estate owned.” This happens when a property is foreclosed on and no relatives or anyone else appeared at the courthouse to bid the minimum on the existing mortgage. Sometimes banks even start the minimum bid so high that nobody would touch it. Many times these properties did not receive a minimum bid at auction and the banks may want to just clear it off their inventory. This can be good for the buyer. We specialize in REO transactions, and although we also handle representing buyers and sellers, it usually works best for us to do our specialty, moving the REO properties for our clients and for you to work with an agent who represents your interests only, referred to as a “buyer’s agent.” Another element to REO transactions is repairs that need to be done on the home and covering utility bills and any HOA fees during this process. As a preferred REO agent, we pay all upfront costs for our client and are reimbursed at the end of the transaction. By fronting these costs, we can substantially decrease the number of weeks this process can take. However, arranging for repairs and utility payments can also cause unexpected delays in the transaction. Having a buyer’s agent that is very familiar with REO transactions is a plus, as they can help educate buyers on this process and stay in communication throughout.

Tips for Hiring A Buyer’s Agent

If you want to hire a buyer’s agent, keep these tips in mind:

    1. Buyer’s agents have a fiduciary responsibility to protect your interests.
    2. Buyer’s agents do not represent the seller, even when the seller is paying their commission.
    3. Also, buyer’s agents are generally paid by the seller. This means it does not cost you to hire one.
    4. Buyer’s agents may ask you to sign a buyer’s broker agreement, which will lay out the agent’s duties to you and specify who pays the commission.
    5. Consider working with a buyer’s agent who has experience working with REOs. We can recommend a few to you.

What Happens Next?

Knowing this, let’s talk about the steps you will go through with your agent. So much happens behind the scenes as it relates to the sharing of information with all the interested parties. It can seem like nothing is happening. As an REO agent, we know buyer’s agents need to be able to update their buyers. Sometimes there isn’t much to tell other than, “Yes, they have the contract and are reviewing…” With so many people involved it can sometimes feel like watching grass grow. We know you are excited about the possibility of this home purchase. Please know we are in regular, even if it’s brief, communication with your agent so they can keep you updated. Sometimes there simply isn’t much to tell as we all wait for contract and offer reviews.

The REO Timeline: From Offer to Acceptance

3 Ways Properties Become Bank Owned:

  1. Through foreclosure proceedings
  2. At auction
  3. Via deed-in-lieu of foreclosure

Now let’s get to the steps in this transaction so you know you can relax.

  1. You find a house you want to buy that is currently in an REO situation. Your agent can help you filter the search. You’ll want a short sale, foreclosure or similar bank-owned property situations. You can do an initial search on the MLS in your area – search for “REO.” We are unusual that we also handle regular retail real estate transactions, commercial, historical, HUD and property management, but we strongly recommend you find a buyer’s agent to work for your best interest in the transaction.
  2. Work with your agent to make an offer. You need to know that if the listing is new on the market, it’s likely the bank won’t deviate much from their asking price. If you are looking for deals, look for homes that have been on the market for more than 30 days. This is also typically the time your bank will ask you to submit a loan application so you get pre-qualified. You can choose the bank that best fits your financing needs.  If you have the flexibility to wait this out or if your offer is rejected by the owner, wait another 30 days and then resubmit your original offer with the old date crossed off and new days added. After the additional 30 days having this property on the books, they may be ready to accept your offer.
  3. Your agent sends us the offer.  No matter which financial institution you choose, you might be waiting for up to 10 days for a response to your offer.
  4. We review the offer and send to our client. If the offer is complete, we send it on to our client. If not, we send it back to your agent to work with you to complete it. The goal is to only submit to the owner one time without having to go back and forth with revisions. This will save a lot of waiting time and frustration. We want to move these along, too. These types of properties have so many task requirements – you’d be stunned!
  5. Our client reviews before sending to the actual property owner. If it’s complete they send it. If not, they send it back to us and we send it back to your agent. At this point, we have done so many of these, we only submit completed offers. The return of an incomplete offer is very unlikely to happen if we are the seller’s agent.
  6. Owner reviews. The owner can accept the offer, counter the offer, or reject the offer. This can take several days.
  7. If the offer is accepted by the owner it is sent to our client.
  8. Our client (the bank) sends us notification of acceptance.
  9. We notify your agent who tells you the good news!
  10. Now, the funding timeline begins and at the end, you have a home! Beware that you may run into unexpected fees during the transaction. Take note that the bank may also run the transaction differently than you would experience in a non-foreclosure home purchase.


Audubon Realty’s REO Division has specialized in the Greater New Orleans market since 2002, providing you personalized service, expert knowledge of the unique Louisiana market and the REO process. We’re ready to help you with your assets. Contact us today!