Buying a REO or foreclosure in Delray Beach
What's an REO?
REO is short for Real Estate Owned. These are houses which have gone through foreclosure which the bank or mortage company now owns. This is not the same as 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 accrued during the foreclosure process. You must also be ready to pay with cash in hand. And on top of all that, you'll receive the property entirely as is. That possibly could comprise existing liens and even current denizens that may require eviction.
A REO, by contrast, is a more tidy and attractive proposition. The REO property did not find a buyer during foreclosure auction. The bank 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 normal disclosure requirements. For instance, in Calfornia, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are informed of.
Are REO's a bargain in Delray Beach?
It's frequently believed that any REO must be a good buy and an possibility for easy money. This simply isn't true. You have to be cautious 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 motivated to get as much as they can for it. When contemplating 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. There are bargains with potential to make money, and many people do very well buying foreclosures. Still there are also many REO's that are not good buys and may not be money makers.
Time to make an offer?
Most lenders 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 learn as much as you can about what they know about the condition of the property and what their process is for getting offers. Since banks typically sell REO properties "as is", you may want 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, 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 counter offer. Then it will be your choice whether to accept their counter, or submit another counter offer. Understand, 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 unusual for the process of offers and counter offers to take days or even weeks.