Buying a foreclosure or REO property in
What is an REO?
REO is short for Real Estate Owned. These are properties that have been through foreclosure and are currently owned by the bank or mortgage company. This is unlike 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 accumulated during the foreclosure process. You must also be prepared to pay with cash in hand. And on top of all that, you'll get the property completely as is. That possibly will comprise standing liens and even current residents that may require eviction.
A REO, on the contrary, is a much neater and attractive deal. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The lender will handle the elimination of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing. Do be aware that REOs may be exempt from typical disclosure requirements. For example, in California, banks are not required to give a Transfer Disclosure Statement, a document that normally requires sellers to reveal any defects of which they are knowledgeable.
Is an REO in Fall River a bargain?
It is commonly presume that any REO must be a good deal and an chance for easy money. This usually isn't true. You have to be cautious about buying a REO if your intent is to make money off of it. While it's true that the bank is typically anxious to sell it quickly, they are also strongly interested 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 flipping foreclosures. However there are also many REO's that are not good buys and may not be money makers.
Prepared to make an offer?
Most mortgage companies 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. 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 taking offers. Since banks usually 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, 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 submitted your offer, you can expect the bank to respond with a counter offer. From there it will be your choice whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be contending with a process that generally involves a group of people at the bank, and they don't work evenings or weekends. It's not uncommon for the process of offers and counter offers to take days or even weeks.