Buying a REO or foreclosure in Longport
What is an REO?
REO's or Real Estate Owned are properties which have been foreclosed upon which the bank or mortage company now possesses. This is not the same as a property up for foreclosure auction. When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees amassed during the foreclosure process. The buyer must also be prepared to pay with cash in hand. And on top of all that, you'll receive the property entirely as is. That possibly could include current liens and even current denizens that need to be removed.
A REO, on the other hand, is a much cleaner and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank will take care of the removal of tax liens, evict occupants if needed and generally plan 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 example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that ordinarily requires sellers to disclose any defects they are informed of.
Are REO's a bargain in Longport?
It's frequently believed that any REO must be a bargain and an possibility for easy money. This isn't necessarily 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 often anxious to sell it fast, they are also strongly interested 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. The bargains with money making potential exist, and many people do very well flipping foreclosures. Still there are also many REO's that are not good buys and not likely to turn a profit.
Time to make an offer?
Most banks have a REO department that you'll work with while buying a REO property from them. Normally 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 learn as much as you can about what they know concerning the condition of the property and what their process is for getting offers. Since banks almost always 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, you'll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. Once you've presented your offer, you can expect the bank to counter offer. From there it will be your decision whether to accept their counter, or offer a counter to the counter offer. Be aware, you'll be dealing with a process that generally involves a group of 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.