Looking for a foreclosure or REO property in ?
What is an REO?
REO is short for Real Estate Owned. These are properties that have been foreclosed upon and are now held by the bank or mortgage company. 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 able to pay with cash in hand. And on top of all that, you'll accept the property completely as is. That may include existing liens and even current residents that may require eviction.
A REO, conversely, is a much cleaner and attractive option. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The lender will deal with the elimination of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing. Do be aware that REOs may be exempt from typical disclosure requirements. In California, for example, banks are not required to give a Transfer Disclosure Statement, a document that normally requires sellers to disclose any defects they are aware of.
Is an REO in Mitchell a bargain?
It is sometimes though that any REO must be a good deal 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 make a profit. While it's true that the bank is typically anxious to sell it quickly, 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. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. Still there are also many REO's that are not good buys and may lose money.
All set 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. 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 regarding the condition of the property and what their process is for accepting offers. Since banks usually 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 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. After you've submitted your offer, you can expect the bank to respond with a counter offer. From there it will be your choice whether to accept their counter, or submit another counter offer. Be aware, 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 quite common for the process of offers and counter offers to take days or even weeks.