Looking for a foreclosure or REO property in ?
What is an REO?
REO is Real Estate Owned. These are houses which have been foreclosed upon and are currently possessed by the bank or mortgage company. This is different than a property up for foreclosure auction. When buying 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 ready to pay with cash in hand. Finally, you'll receive the property one-hundred percent as is. That possibly will include prevailing liens and even current occupants that may require expulsion.
A REO, on the other hand, is a much neater and attractive transaction. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The bank will see to the removal of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing. Take notice that REOs may be exempt from normal disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to tell you about any defects they are aware of.
Is an REO in Sugarloaf Key a bargain?
It is occasionally presume that any REO must be a good deal and an chance for easy money. This isn't always true. You have to be very careful about buying a REO if your intent is make money. While it's true that the bank is typically anxious to sell it quickly, they are also strongly encouraged to get as much as they can for it. When contemplating 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. It is possible to find REOs with money-making potential, and many people do very well buying foreclosures. But there are also many REO's that are not good buys and may lose money.
Prepared to make an offer?
Most lenders have a REO department that you'll work with when buying a REO property from them. Typically the REO department will use a listing agent to get their REO properties listed on the local MLS. Prior to making your offer, you'll want to contact either the listing agent or REO department at the bank and learn 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 usually sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unseen damage and cancel 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. Once you've submitted your offer, you can expect the bank to make a counter offer. From there it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be contending with a process that probably involves multiple people at the bank, and they don't work evenings or weekends. It's not uncommon for the process of offers and counter offers to take days or even weeks.