Buying a foreclosure or REO property in

What is an REO?

REO is Real Estate Owned. These are houses which have been foreclosed upon which the bank or mortage company presently holds. This differs from 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 amassed during the foreclosure process. The buyer must also be prepared to pay with cash in hand. To top everything off, you'll get the property one-hundred percent as is. That may consist of current liens and even current denizens that need to be kicked out.

A REO, on the other hand, is a more tidy and attractive option. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will see to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Do be aware that REOs may be exempt from normal disclosure requirements. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects of which they are knowledgeable.

Is an REO in Sugarloaf Key a bargain?

It's occasionally presume that any REO must be a good buy and an possibility for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is profit from the sell. While it's true that the bank is usually anxious to sell it soon, they are also strongly motivated 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. However there are also many REO's that are not good buys and may not be money makers.

Time to make an offer?

Most lenders have a REO department that you'll work with while buying a REO property from them. Usually 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 regarding the condition of the property and what their process is for taking offers. Since banks almost always sell REO properties "as is", you may want 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, providing documentation of your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender. After you've presented your offer, you can expect the bank to make a counter offer. At this point it will be up to you to decide whether to accept their counter, or make another counter offer. Realize, you'll be working with a process that probably involves a group of people at the bank, and they don't work evenings or weekends. It's not unusual for the process of offers and counter offers to take days or even weeks.


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