Buying a foreclosure or REO property in
What is an REO?
REO is Real Estate Owned. These are homes that have completed the foreclosure process which the bank or mortage company currently owns. This is different than real estate 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 ready to pay with cash in hand. And on top of all that, you'll receive the property completely as is. That possibly may consist of prevailing liens and even current tenants that need to be expelled.
A REO, on the other hand, is a more tidy and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The lender will handle the elimination of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing. Take notice that REOs may be exempt from normal disclosure requirements. For example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects of which they are informed.
Is an REO in Bucklin a bargain?
It's frequently though that any REO must be a good buy and an possibility for easy money. This simply 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 fast, 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. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. But there are also many REO's that are not good buys and may not be money makers.
Time to make an offer?
Most banks 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 discover as much as you can about what they know concerning the condition of the property and what their process is for taking offers. Since banks most commonly sell REO properties "as is", you'll want to be sure and include an inspection contingency in your offer that gives you time to check for unseen damage and withdraw the offer if you find it.
As with making any offer on real estate, you'll make your offer 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. At this point it will be your decision whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be dealing with a process that most likely 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.