Buying a REO or foreclosure in Longport
What is an REO?
REO stands for Real Estate Owned. These are properties which have gone through foreclosure which the bank or mortage company currently owns. This is unlike 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 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 receive the property totally as is. That may consist of existing liens and even current occupants that may require eviction.
A REO, on the other hand, is a much neater and attractive transaction. The REO property didn't find a buyer during foreclosure auction. The lender now owns it. The lender will take care of the elimination 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 typical disclosure requirements. For example, in California, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects of which they are knowledgeable.
Are REO's a bargain in Longport?
It's commonly believed that any REO must be a steal 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 profit from the sell. While it's true that the bank is typically anxious to sell it soon, they are also strongly interested 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 flipping foreclosures. But there are also many REO's that are not good buys and may lose money.
All set to make an offer?
Most mortgage companies have a REO department that you'll work with while buying a REO property from them. Commonly 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 receiving offers. Since banks usually 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 terminate 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. At this point it will be your choice whether to accept their counter, or make another counter offer. Realize, you'll be working with a process that usually 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.