Buying a foreclosure or REO property in
What's an REO?
REO stands for Real Estate Owned. These are properties that have been through foreclosure which the bank or mortage company now holds. This is unlike 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. You must also be ready to pay with cash in hand. To top everything off, you'll accept the property one-hundred percent as is. That possibly may comprise prevailing liens and even current occupants that may require eviction.
A REO, on the other hand, is a more tidy and attractive option. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The lender will attend to the elimination of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing. You should be aware 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 tell you about any defects of which they are informed.
Is an REO in Victorville a bargain?
It is sometimes presume that any REO must be a bargain and an chance for easy money. This simply isn't true. You have to be prudent about buying a REO if your intent is make a profit. While it's true that the bank is typically 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. There are bargains with potential to make money, and many people do very well buying foreclosures. However there are also many REO's that are not good buys and may lose money.
Time to make an offer?
Most lenders have a REO department that you'll work with when buying a REO property from them. Commonly 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 about the condition of the property and what their process is for receiving offers. Since banks almost always 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 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. Once you've submitted your offer, you can expect the bank to counter offer. Then it will be up to you to decide whether to accept their counter, or submit another counter offer. Be aware, you'll be contending with a process that most likely involves multiple 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.