Buying REO property or a foreclosure?
Just as with any home purchase, your smartest move is to hire a professional real estate agent.
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 gone through foreclosure and are presently held by the bank or mortgage company. This is unlike 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 accumulated during the foreclosure process. The buyer must also be willing to pay with cash in hand. And on top of all that, you'll accept the property totally as is. That possibly may comprise of standing liens and even current residents that need to be evicted.
A bank-owned property, on the contrary, is a much cleaner and attractive deal. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The bank will deal with 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 normal disclosure requirements.
For example, 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 aware.
By hiring Shannon Wade Henley, you can rest assured knowing all parties are fulfilling Florida state disclosure requirements.
Are REO properties a bargain?
It is occasionally thought that any REO must be a good buy and a possibility for easy money. This isn't always the case. You have to be very careful about buying a REO if your intent is to make money off of it. Even though the bank is typically eager to sell it promptly, they are also motivated to minimize any losses.
Look carefully at the listing and sales prices of similar homes in the neighborhood when considering the purchase of an REO. And factor in any repairs or remodeling 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. Still, there are also many REOs that are not good buys and may not be money makers.
Time to make an offer?
Most banks have staff dedicated to REO that you'll work with while buying REO property from them. Usually 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 their knowledge regarding the condition of the property and what their process is for receiving offers. Since banks usually sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unknown damage and retract the offer if you find it.
If, as a buyer, you can provide documentation showing 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 holds for any type of real estate offer.)
After you've presented your offer, it's customary for the bank to respond with a counter offer. At this point it will be up to you to decide whether to accept their counter, or make another counter offer.
Understand, you'll be contending with a process that usually involves multiple 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.