Thinking of Purchasing an REO property or a foreclosure?
|Investing in a bank-owned property is not something to be taken lightly. For more information, simply contact me through my site or e-mail me. I'm happy to address questions you have regarding real estate foreclosures.|
What's an REO?"REO" or Real Estate Owned are properties which have been through foreclosure and are currently held by the bank or mortgage company. This is not the same as real estate up for foreclosure auction.
If you buy a property during a foreclosure sale (otherwise known as a "short sale"), you must pay at least the loan balance plus any interest and other fees amassed during the foreclosure process. You must also be ready to pay with cash in hand. Finally, you'll accept the property completely "as-is". That may involve current liens and even current tenants that may require expulsion.
A bank-owned property, conversely, is a more tidy and attractive proposition. The REO property didn't find a buyer during foreclosure auction. Now the bank owns it. The bank will take care of 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 standard disclosure requirements. For instance, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that ordinarily requires sellers to tell you about any defects of which they are knowledgeable. By hiring Tom Rochford Real Estate Company, you can rest assured knowing all parties are fulfilling California state disclosure requirements.
Are REO properties a bargain?It's sometimes assumed that any foreclosure must be a bargain and a possibility for guaranteed profit. This often isn't true. You have to be very careful about buying a REO if your intent is to make money off of it. While it's true that the bank is usually anxious to offload it promptly, they are also motivated to minimize any losses.
When contemplating the value of REO property, carefully analyze 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. The bargains with money making potential exist, 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.
Ready to make an offer?Most lenders have a department dedicated to REO that you'll work with when buying REO property from them. To get their properties advertised on the local MLS, the lender will frequently hire a listing agent.
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 about the condition of the property and what their process is for receiving offers. Since banks typically sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for hidden damage and withdraw the offer if you find it. If, as a buyer, you can provide documentation proving your ability to secure financing, 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 type of real estate offer.)
Once you've made your offer, it's customary for the bank to counter offer. From there it will be your decision whether to accept their counter, or submit another counter offer. Realize, you'll be dealing with a process that generally involves several people at the bank, and they don't work evenings or weekends. It's not uncommon for the process of offers and counter offers to take days or even weeks.