Buying a foreclosure or REO property in
What is an REO?
REO's or Real Estate Owned are homes which have been foreclosed upon which the bank or mortage company presently possesses. This is not the same as 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. To top everything off, you'll get the property totally as is. That possibly may comprise current liens and even current residents that need to be removed.
A REO, on the other hand, is a much cleaner and attractive option. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The lender will take care of the elimination of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing. Take notice that REOs may be exempt from typical disclosure requirements. For instance, in Calfornia, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to make known any defects of which they are aware.
Is an REO in Evansville a bargain?
It is frequently though that any REO must be a steal and an opportunity for easy money. This isn't always true. You have to be very careful 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 soon, they are also strongly motivated 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. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. But there are also many REO's that are not good buys and may lose money.
Ready to make an offer?
Most lenders have a REO department that you'll work with when buying a REO property from them. Usually 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 find out as much as you can about what they know concerning the condition of the property and what their process is for taking offers. Since banks typically 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 retract the offer if you find it.
As with making any offer on real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. After you've presented your offer, you can expect the bank to counter offer. From there it will be your decision whether to accept their counter, or make another counter offer. Understand, you'll be contending with a process that most likely involves several 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.