Purchasing REO property or a foreclosure ?
|Savvy consumers will turn to a seasoned pro when considering a foreclosed property. For more information, you can contact me through my site or e-mail me. I'm happy to address questions you have about real estate foreclosures.|
What is an REO?"REO" is Real Estate Owned. These are properties which have been through foreclosure and are now held by the bank or mortgage company. 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. The buyer must also be willing to pay with cash in hand. Finally, you'll accept the property entirely as is. That possibly may consist of standing liens and even current tenants that may require expulsion.
A bank-owned property, by contrast, is a much cleaner and attractive transaction. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The lender will take care of the elimination of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing.
Take notice that REOs may be exempt from standard disclosure requirements. For instance, in California, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects of which they are knowledgeable. By hiring me you can rest assured knowing all parties are fulfilling Florida state disclosure requirements.
Is REO property a bargain?It's sometimes assumed that any foreclosure must be a good deal and a chance for easy money. This isn't necessarily 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 eager to sell it promptly, they are also motivated to get as much as they can for it.
Look closely at the listing and sales prices of similar properties in the neighborhood when considering the purchase of an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in. There are bargains with potential to make money, and many people do very well buying foreclosures. But there are also many REOs that are not good buys and not likely to turn a profit.
All set to make an offer?Most banks have staff dedicated to REO that you'll work with while buying REO property from them. To get their properties advertised on the local MLS, the lender will typically hire a listing agent.
Prior to making your offer, you'll want to contact either the listing agent or REO department at the bank and find out as much as you can about their knowledge concerning the condition of the property and what their process is for taking offers. Since banks typically 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 hidden damage and cancel the offer if you find it. If, as a buyer, you can provide documentation demonstrating your ability to pay, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This is generally true for any real estate offer.)
Once you've presented your offer, you can expect the bank to counter offer. At this point it will be your decision whether to accept their counter, or submit another counter offer. Be aware, you'll be dealing with a process that usually involves multiple people at the bank, and they don't work evenings or weekends. It's quite common for there to be days or even weeks of going back and forth.