Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are houses that have been through foreclosure and are now owned by the bank or mortgage company. This differs from 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 accumulated during the foreclosure process. The buyer must also be able to pay with cash in hand. To top everything off, you'll get the property totally as is. That possibly could consist of current liens and even current denizens that need to be evicted.
A REO, conversely, is a much neater and attractive deal. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The lender will deal with 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. Note that REOs may be exempt from standard disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that typically requires sellers to make known any defects of which they are informed.
Are REO's a bargain in Mitchell?
It is frequently assumed that any REO must be a good deal and an chance for easy money. This isn't always true. You have to be cautious about buying a REO if your intent is make money. While it's true that the bank is usually anxious to sell it fast, they are also strongly encouraged 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. It is possible to find REOs with money-making potential, and many people do very well buying and selling foreclosures. But there are also many REO's that are not good buys and may not be money makers.
Ready 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 discover 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 usually sell REO properties "as is", it may be in your best interest to include an inspection contingency in your offer that gives you time to check for unknown damage and withdraw 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 respond with a counter offer. Then it will be up to you to decide whether to accept their counter, or submit another counter offer. Understand, you'll be working with a process that most likely involves a group of 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.