Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are properties that have completed the foreclosure process which the bank or mortage company currently owns. This is unlike 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 able to pay with cash in hand. And on top of all that, you'll get the property entirely as is. That possibly may consist of standing liens and even current occupants that may require removal.
A REO, on the other hand, is a much neater and attractive deal. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The lender will deal with 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. Take notice that REOs may be exempt from typical disclosure requirements. For instance, in Calfornia, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to make known any defects they are aware of.
Is an REO in Bucklin a bargain?
It's frequently believed that any REO must be a steal and an possibility for easy money. This isn't necessarily true. You have to be cautious about buying a REO if your intent is to make money off of it. While it's true that the bank is often anxious to sell it fast, they are also strongly interested to get as much as they can for it. When pondering 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. However there are also many REO's that are not good buys and may not be money makers.
All set to make an offer?
Most lenders 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. 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 concerning the condition of the property and what their process is for taking offers. Since banks usually sell REO properties "as is", it may be in your best interest to include an inspection contingency in your offer that gives you time to check for unseen damage and retract 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. Once you've made your offer, you can expect the bank to make a counter offer. Then it will be your choice whether to accept their counter, or make another counter offer. Realize, you'll be contending with a process that probably involves several people at the bank, and they don't work evenings or weekends. It's typical for the process of offers and counter offers to take days or even weeks.