Buying a foreclosure or REO property in
What is an REO?
REO's or Real Estate Owned are houses which have been through foreclosure and are now possessed by the bank or mortgage company. This is different than 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. You must also be prepared to pay with cash in hand. And on top of all that, you'll get the property totally as is. That possibly will comprise existing liens and even current denizens that need to be evicted.
A REO, on the contrary, is a much cleaner and attractive deal. The REO property was unable to find a buyer during foreclosure auction. The bank now owns it. The lender will attend to the elimination of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing. You should be aware that REOs may be exempt from normal disclosure requirements. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to disclose any defects of which they are aware.
Are REO's a bargain in Longport?
It's sometimes believed that any REO must be a good deal and an opportunity for easy money. This isn't always 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 fast, 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 foreclosures. However 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 banks 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 most commonly 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.
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 submitted your offer, you can expect 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 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 typical for the process of offers and counter offers to take days or even weeks.