Looking for a foreclosure or REO property in ?
What is an REO?
REO is short for Real Estate Owned. These are houses that have completed the foreclosure process and are currently held by the bank or mortgage company. 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 added during the foreclosure process. The buyer must also be able to pay with cash in hand. And on top of all that, you'll receive the property completely as is. That may consist of standing liens and even current residents that need to be expelled.
A REO, conversely, is a more tidy and attractive transaction. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The bank will deal with the removal 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 standard disclosure requirements. In California, for example, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects of which they are knowledgeable.
Is an REO in Artesia a bargain?
It's commonly assumed that any REO must be a good buy and an possibility 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 promptly, 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 foreclosures. But 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 while buying a REO property from them. Normally 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 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 almost always 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 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. Once you've made your offer, you can expect the bank to respond with a counter offer. At this point it will be your choice whether to accept their counter, or offer a counter to the counter offer. Be aware, you'll be dealing with a process that probably involves a group of 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.