Buying a foreclosure or REO property in
What's an REO?
REO is an abbreviation for Real Estate Owned. These are properties that have been foreclosed upon which the bank or mortage company now possesses. This differs from a property 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. The buyer must also be willing to pay with cash in hand. To top everything off, you'll accept the property entirely as is. That may comprise current liens and even current tenants that need to be put out.
A REO, on the other hand, is a more tidy and attractive option. The REO property didn't find a buyer during foreclosure auction. The lender now owns it. The lender will deal with 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 standard disclosure requirements. For instance, in Calfornia, banks are not required to give a Transfer Disclosure Statement, a document that normally requires sellers to reveal any defects of which they are informed.
Are REO's a bargain in Victorville?
It is frequently believed that any REO must be a good buy and an chance for easy money. This isn't always true. You have to be very careful 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 quickly, 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. The bargains with money making potential exist, 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.
Prepared to make an offer?
Most banks 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. 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 about the condition of the property and what their process is for accepting 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 hidden damage and cancel 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 submitted your offer, you can expect the bank to respond with a counter offer. Then it will be your decision whether to accept their counter, or submit another counter offer. Realize, you'll be dealing with a process that usually involves several 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.