Buying a foreclosure or REO property in
What is an REO?
REO's or Real Estate Owned are properties that have completed the foreclosure process which the bank or mortage company now possesses. This is different than 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 accrued during the foreclosure process. You must also be prepared to pay with cash in hand. And on top of all that, you'll accept the property totally as is. That may consist of current liens and even current occupants that may require eviction.
A REO, on the other hand, is a more tidy and attractive transaction. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The bank will handle the removal of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing. Note that REOs may be exempt from normal disclosure requirements. For instance, in Calfornia, banks are exempt from giving a Transfer Disclosure Statement, a document that typically requires sellers to reveal any defects they are knowledgeable of.
Is an REO in Fall River a bargain?
It's sometimes though that any REO must be a bargain and an chance for easy money. This isn't always 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 usually anxious to sell it promptly, they are also strongly encouraged 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. But there are also many REO's that are not good buys and may not be money makers.
Time to make an offer?
Most banks have a REO department that you'll work with when 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 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 most commonly 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 hidden damage and cancel 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. Once you've presented your offer, you can expect the bank to respond with a counter offer. From there it will be up to you to decide whether to accept their counter, or make another counter offer. Understand, you'll be dealing with a process that generally involves multiple 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.