Looking for a foreclosure or REO property in ?
What is an REO?
REO is an abbreviation for Real Estate Owned. These are homes which have gone through foreclosure and are currently held by the bank or mortgage company. This is different than real estate up for foreclosure auction. When buying 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. You must also be ready to pay with cash in hand. And on top of all that, you'll accept the property entirely as is. That possibly may include current liens and even current occupants that need to be thrown out.
A REO, by contrast, is a much neater and attractive option. The REO property was unable to find a buyer during foreclosure auction. Now the bank owns it. The bank will take care of 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 standard disclosure requirements. In California, for example, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to make known any defects of which they are aware.
Are REO's a bargain in Piedmont?
It's commonly believed that any REO must be a good deal and an opportunity for easy money. This simply isn't true. You have to be cautious about buying a REO if your intent is make a profit. While it's true that the bank is usually anxious to sell it fast, they are also strongly interested 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. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. But there are also many REO's that are not good buys and may not be money makers.
Time to make an offer?
Most lenders have a REO department that you'll work with while 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 learn as much as you can about what they know concerning the condition of the property and what their process is for receiving offers. Since banks almost always 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 withdraw 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 made your offer, you can expect the bank to counter offer. From there it will be up to you to decide whether to accept their counter, or make another counter offer. Be aware, you'll be contending with a process that usually 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.