How to buy a bank-owned foreclosure in Puerto Rico

What 'bank-owned' means

When a borrower stops paying and the foreclosure process finishes without a third-party buyer, the property goes back to the lender. It becomes REO — real estate owned — and the bank now wants it off its books.

Banks are not in the business of holding houses. That is the source of the discount: they are motivated sellers with an asset that costs them money every month it sits.

Who sells them in Puerto Rico

The biggest inventories belong to Banco Popular (through its deShow division), FirstBank and Oriental Bank. Fannie Mae and Freddie Mac also hold island inventory through HomePath and HomeSteps.

There is a second tier that most buyers never find: the cooperativas — local credit unions like CooPACA, Camuy, Cabo Rojo, Rincón and Moroveña. They publish their repossessed properties on their own websites, they get far less traffic than the big banks, and they will often finance the purchase themselves. Less competition is a real advantage.

As-is means as-is

Almost every REO sale here is as-is. The bank will not repair anything, will not credit you for repairs, and in many cases has never set foot inside the property. Nobody is hiding problems from you — nobody actually knows what the problems are.

That makes the inspection non-negotiable. Pay for it. A $400 inspection that reveals a $30,000 roof is the best money you will spend in the whole process.

Where the risk actually is

• Occupancy: some properties still have people living in them. Eviction is your problem after closing, and it can take many months.
• Back debt: unpaid CRIM property taxes, HOA fees and utility liens can attach to the property. Your notary must check this before closing.
• Deferred maintenance: an empty house in a tropical climate deteriorates fast. Humidity, mold and termites do serious damage in a year of vacancy.
• Title: verify at the Registro de la Propiedad that the bank's own title is clean. It usually is, but 'usually' is not a strategy.

How to make an offer that gets taken seriously

• Come with a pre-approval letter or proof of funds attached. Banks discard offers without one.
• Do not lowball a property that just came on the market. Banks price at appraisal at first and negotiate after 60–90 days of no movement.
• Watch listings that have sat unsold. Time on market is your leverage.
• Be ready to move fast on closing. A bank will often take slightly less money from a buyer who can close quickly and cleanly.