Buying a foreclosure or REO property in
What is an REO?
REO is short for Real Estate Owned. These are homes that have completed the foreclosure process which the bank or mortage company presently possesses. 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 added during the foreclosure process. You must also be willing to pay with cash in hand. And on top of all that, you'll accept the property completely as is. That might comprise standing liens and even current tenants that may require removal.
A REO, conversely, is a much neater and attractive deal. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will deal with 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. Take notice that REOs may be exempt from normal disclosure requirements. In California, for example, banks are not required to give a Transfer Disclosure Statement, a document that normally requires sellers to disclose any defects they are informed of.
Is an REO in Rockledge a bargain?
It is sometimes presume that any REO must be a good buy and an chance for easy money. This just 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 sell it quickly, they are also strongly motivated to get as much as they can for it. When pondering 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. Still there are also many REO's that are not good buys and may not be money makers.
Time to make an offer?
Most banks have a REO department that you'll work with when buying a REO property from them. Usually the REO department will use a listing agent to get their REO properties listed on the local MLS. Prior to making your offer, you'll want to contact either the listing agent or REO department at the bank and discover as much as you can about what they know regarding the condition of the property and what their process is for accepting offers. Since banks most commonly 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 unknown damage and retract the offer if you find it.
As with making any offer on real estate, your offer may be more attractive if you can include documentation of your ability to pay, 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. From there it will be your choice whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be contending with a process that most likely involves several 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.