Buying a foreclosure or REO property in
What is an REO?
REO's or Real Estate Owned are properties which have completed the foreclosure process and are currently owned by the bank or mortgage company. This differs from 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. The buyer must also be willing to pay with cash in hand. To top everything off, you'll get the property completely as is. That could comprise current liens and even current occupants that need to be thrown out.
A REO, on the contrary, is a much cleaner and attractive option. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The lender will take care of the elimination of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing. You should be aware that REOs may be exempt from normal disclosure requirements. For instance, in Calfornia, banks are not required to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to reveal any defects they are knowledgeable of.
Are REO's a bargain in Casselberry?
It is frequently presume that any REO must be a bargain and an chance for easy money. This usually isn't true. You have to be cautious 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 interested 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. 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 not likely to turn a profit.
Ready 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 learn as much as you can about what they know concerning the condition of the property and what their process is for getting offers. Since banks almost always 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 terminate 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 counter offer. At this point it will be your choice whether to accept their counter, or submit another counter offer. Be aware, you'll be contending with a process that usually 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.