Looking for a foreclosure or REO property in ?
What's an REO?
REO stands for Real Estate Owned. These are homes that have completed the foreclosure process and are now possessed by the bank or mortgage company. This differs from 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. You must also be ready to pay with cash in hand. Finally, you'll accept the property totally as is. That possibly could consist of prevailing liens and even current residents that may require expulsion.
A REO, by contrast, is a much cleaner and attractive transaction. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The lender will attend to 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. Note that REOs may be exempt from standard disclosure requirements. For example, in California, banks do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects of which they are knowledgeable.
Is an REO in Longport a bargain?
It is occasionally presume that any REO must be a good buy and an chance for easy money. This just isn't true. You have to be prudent 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 fast, they are also strongly motivated 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 buying foreclosures. But there are also many REO's that are not good buys and may lose money.
Prepared to make an offer?
Most lenders have a REO department that you'll work with in 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 find out as much as you can about what they know concerning the condition of the property and what their process is for accepting offers. Since banks typically 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 cancel 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. After you've submitted your offer, you can expect the bank to make a counter offer. Then it will be your choice whether to accept their counter, or submit another counter offer. Realize, you'll be working with a process that generally 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.