Looking for a foreclosure or REO property in ?
What is an REO?
REO is an abbreviation for Real Estate Owned. These are homes which have been foreclosed upon which the bank or mortage company presently possesses. This is different than a property up for foreclosure auction. If you buy a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process. You must also be prepared to pay with cash in hand. And on top of all that, you'll accept the property entirely as is. That possibly may include standing liens and even current tenants that need to be removed.
A REO, conversely, is a much cleaner and attractive transaction. The REO property was unable to find a buyer during foreclosure auction. Now the bank owns it. The lender will attend to the removal of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing. You should be aware that REOs may be exempt from typical disclosure requirements. For example, in California, banks are not required to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to tell you about any defects they are aware of.
Is an REO in Sunset Beach a bargain?
It is sometimes assumed that any REO must be a good deal and an possibility for easy money. This just isn't true. You have to be very careful about buying a REO if your intent is make a profit. While it's true that the bank is typically anxious to sell it soon, they are also strongly encouraged to get as much as they can for it. When considering the value of a REO, you need to look closely at comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the house for resale. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. But there are also many REO's that are not good buys and may lose money.
Time to make an offer?
Most mortgage companies have a REO department that you'll work with while buying a REO property from them. Commonly the REO department will use a listing agent to get their REO properties listed on the local MLS. Before making your offer, you'll want to contact either the listing agent or REO department at the bank and find out as much as you can about what they know about the condition of the property and what their process is for getting offers. Since banks typically sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for hidden damage and retract the offer if you find it.
As with making any offer on real estate, your offer may be more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. After you've submitted your offer, you can expect the bank to respond with a counter offer. Then it will be your choice whether to accept their counter, or make another counter offer. Be aware, you'll be contending with a process that generally involves a group of people at the bank, and they don't work evenings or weekends. It's quite common for the process of offers and counter offers to take days or even weeks.