Buying a foreclosure or REO property in
What's an REO?
REO means Real Estate Owned. These are houses that have been through foreclosure which the bank or mortage company now holds. This is unlike 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 get the property completely as is. That possibly may include standing liens and even current tenants that need to be removed.
A REO, on the other hand, is a much neater and attractive deal. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The lender will handle 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 are not required to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to make known any defects of which they are informed.
Is an REO in Danville a bargain?
It is frequently presume that any REO must be a bargain and an possibility for easy money. This usually isn't true. You have to be prudent about buying a REO if your intent is make a profit. While it's true that the bank is usually anxious to sell it promptly, they are also strongly encouraged 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 buying and selling foreclosures. But there are also many REO's that are not good buys and may not be money makers.
All set 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 find out as much as you can about what they know concerning the condition of the property and what their process is for accepting 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 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 submitted your offer, you can expect the bank to counter offer. Then it will be your decision whether to accept their counter, or make another counter offer. Realize, you'll be working with a process that usually involves multiple people at the bank, and they don't work evenings or weekends. It's quite common for the process of offers and counter offers to take days or even weeks.