Buying a foreclosure or REO property in
What's an REO?
REO means Real Estate Owned. These are homes which have been foreclosed upon which the bank or mortage company now owns. This differs from real estate 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 willing to pay with cash in hand. And on top of all that, you'll accept the property completely as is. That possibly could consist of current liens and even current occupants that need to be removed.
A REO, on the contrary, is a much neater and attractive proposition. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The bank will handle the elimination of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Take notice that REOs may be exempt from typical disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to disclose any defects they are knowledgeable of.
Is an REO in Delray Beach a bargain?
It is frequently presume that any REO must be a good deal and an opportunity 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 often anxious to sell it promptly, 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 buying and selling foreclosures. However there are also many REO's that are not good buys and may not be money makers.
All set to make an offer?
Most mortgage companies have a REO department that you'll work with when 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. 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 accepting offers. Since banks typically 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 unseen 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. After you've presented your offer, you can expect the bank to make a counter offer. At this point it will be your choice whether to accept their counter, or offer a counter to the counter offer. Realize, you'll be dealing with a process that generally 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.