Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are houses which have been through foreclosure and are currently possessed by the bank or mortgage company. This is different than 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 accrued during the foreclosure process. The buyer must also be prepared to pay with cash in hand. Finally, you'll get the property completely as is. That possibly will include current liens and even current occupants that need to be expelled.
A REO, on the contrary, is a much neater and attractive deal. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The lender will attend to the removal of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing. Do be aware that REOs may be exempt from normal disclosure requirements. For example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to disclose any defects of which they are knowledgeable.
Is an REO in Davie a bargain?
It is occasionally though that any REO must be a good buy and an possibility for easy money. This simply isn't true. You have to be very careful about buying a REO if your intent is make money. While it's true that the bank is typically anxious to sell it soon, 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. The bargains with money making potential exist, and many people do very well buying foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.
All set to make an offer?
Most mortgage companies have a REO department that you'll work with in buying a REO property from them. Typically 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 about 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 cancel 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 respond with a counter offer. Then it will be your decision whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be dealing with a process that most likely involves a group of 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.