Buying a REO or foreclosure in Delray Beach
What is an REO?
REO means Real Estate Owned. These are houses that have been foreclosed upon which the bank or mortage company now owns. This is different than a property 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 prepared to pay with cash in hand. Finally, you'll get the property totally as is. That may consist of current liens and even current occupants that need to be kicked out.
A REO, conversely, is a much cleaner and attractive transaction. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The lender will deal with the removal of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing. Do be aware that REOs may be exempt from normal disclosure requirements. For instance, in Calfornia, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to make known any defects they are knowledgeable of.
Are REO's a bargain in Delray Beach?
It is frequently assumed that any REO must be a steal and an opportunity for easy money. This isn't necessarily true. You have to be very careful about buying a REO if your intent is to make money off of it. While it's true that the bank is usually anxious to sell it soon, they are also strongly encouraged 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. However there are also many REO's that are not good buys and may lose money.
All set to make an offer?
Most banks 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. 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 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 unseen damage and terminate the offer if you find it.
As with making any offer on real estate, your offer may be more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. Once you've made your offer, you can expect the bank to make a counter offer. Then it will be up to you to decide whether to accept their counter, or make another counter offer. Realize, you'll be dealing with a process that probably 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.