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Lyman J. (Greg) Gregory, III



90 Southside Avenue,

Ste 100

Asheville, NC 28801

90 Southside Avenue Suite 100


90 Southside Avenue Suite 100

A Legal Moment

REO Contracts


        REO is an abbreviation for "real estate owned," and refers to real property owned by a bank and offered for sale.  Banks have typically acquired their REO properties through foreclosure.  The components of an REO contract are the standard Offer to Purchase and Contract and an REO addendum specific to the selling bank.

        REO contracts are challenging because REO addenda include unfavorable terms for buyers, require buyers to meet almost impossible contingencies, and permit selling banks to continue marketing the property in order to receive backup offers.

        You can most effectively assist your buyer clients by reading the REO addendum carefully, explaining its terms thoroughly, and working with them to meet contingencies ahead of schedule.  Here are a few specific tips for reaching the closing table successfully.

        First, advise your buyer to line up financing (or proof of funds for a cash purchase) as early as possible.  Most REO addenda require the buyer to provide evidence of loan pre-qualification or proof of funds prior to the seller's acceptance.  Also, be sure your buyer is completely comfortable with his or her lender and the loan terms.  Some REO addenda state that a buyer who changes lenders, or the loan type or terms, is in breach of the contract.

        Second, be careful about seller offers to pay for the buyer's closing.  This may seem like a nice perk, but the seller's attorney will not be providing legal advice to the buyer or looking out for the buyer's interests.  The best scenario is to negotiate for the seller to agree to pay for the title insurance policy, but allow the buyer to select the closing attorney at buyer's own expense.

       Third, do as much as you can on property inspections before even submitting an offer.  REO addenda typically give very short inspection periods, such as a mere five days.  The sale will undoubtedly be an "as-is" purchase, and the contract will require the buyer to obtain all COs and other governmental approvals.  Knowing exactly what your buyer is getting as early as possible is critical.

        Good luck getting to closing in your REO contracts.



Do not hesitate to contact me to receive more information on this topic or to suggest topics for future editions of 'A Legal Moment'. You may not rely on this content as legal advice for any specific situation, but should instead contact an attorney for specific advice.

Miller, Marshall, Roth , P.C. • 90 Southside Avenue Suite 100 • Asheville, NC 28801
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