Looking for a foreclosure or REO property in ?
What is an REO?
REO's or Real Estate Owned are properties which have been foreclosed upon which the bank or mortage company presently owns. 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 added during the foreclosure process. The buyer must also be able to pay with cash in hand. Finally, you'll receive the property totally as is. That could consist of prevailing liens and even current denizens that may require expulsion.
A REO, on the other hand, is a much cleaner and attractive proposition. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The lender will take care of 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 typical disclosure requirements. In California, for example, banks are not required to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to disclose any defects of which they are informed.
Are REO's a bargain in Piedmont?
It's occasionally believed that any REO must be a good buy and an possibility for easy money. This simply isn't true. You have to be prudent about buying a REO if your intent is to make money off of it. While it's true that the bank is often anxious to sell it fast, they are also strongly encouraged 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 buying foreclosures. Still there are also many REO's that are not good buys and may lose money.
Prepared 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. 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 regarding the condition of the property and what their process is for accepting offers. Since banks almost always 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 unseen 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. After you've presented 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 contending with a process that usually 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.