REO (Real Estate Owned) properties make up a significant portion of the inventory in the Puget Sound real estate market. As a reality of the current real estate industry REO transactions draw plenty of confusion and frustration for many who are involved. Here at Ticor we’ve been handling a steady volume of REO properties and deal with some large REO accounts. Based on our experience with REO transactions we’ve produced the following outline.

Please understand the REO process described below represents an “average” experience and just like any real estate transaction many factors can affect time frames and conditions.  For more details, click the following link for hot tips on working with escrow on an REO closing.

The Beginning – Mutual Acceptance

The beginning is signified by mutual acceptance of the Purchase and Sales Agreement

Day 1 Escrow is opened and Title is OrderedEarnest Money is deposited
Day 2-3 Deed is prepared and sent to SellerBuyer’s vesting info is taken from the purchase contract, if incorrect the Seller will request proper vesting and an addendum will be required

Buyer’s Lender requests fees from Escrow

Escrow orders HOA, Lien Demands and other money matters associated with the property

Day 4-5 Seller will begin requesting weekly status updates from Escrow regarding specifics like the appraisal, inspections, earnest money deposits, underwriting criteria for buyer’s lender, etc.

The Middle – Underwriting (10-20 Business Days)

For the next 2-4 weeks the Buyer’s Lender will work on underwriting the loan for the transaction and await approval to move forward.

The End – Closing Process (3-7 Business Days)

Day 1 Buyer’s Lender delivers loan documents to EscrowEscrow completes an estimated HUD and sends to Buyer’s Lender for approval
Day 2-3 Buyer’s Lender approves estimated HUD and notifies EscrowUpon Lender HUD Approval, Seller’s HUD is sent for signature

Schedule Buyer to sign loan documentation

Day 3-6 Signed Buyer’s documents are received back at EscrowFunding Package is assembled and sent to Buyer’s Lender for final funding approval pending Seller Signed HUD

Seller Signed HUD is received by Escrow and forwarded to Buyer’s Lender to accompany the Funding Package

 

If the Buyer’s Lender is satisfied with the funding package and conditions the transaction will fund, the Deed will subsequently be recorded and the transaction will close.

 

Questions or thoughts?  Please leave a comment below!

2 Comments
  1. Hi Kari, Is it true that a Buyer of REO property only gets title coverage as far back as the Bank’s opwnership? If so, how should a Buyer’s rep. protect the Buyer for comprehensive coverage? Thanks, Marylyn

  2. Great question Marylyn! The coverage provided by the title insurance policy is not affected by the type of deed involved with the transaction. The buyer has coverage as far back as the recorded indices go.
    It is quite common for REO sellers/banks to give a limited type of warranty deed (i.e. Special Warranty Deed, Bargain & Sale Deed, etc…) which, as the name implies, limits the warranties given by seller to the time period in which they held title.

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