Buying a foreclosure or REO property in
What is an REO?
REO's or Real Estate Owned are houses which have been foreclosed upon which the bank or mortage company now holds. 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 accrued during the foreclosure process. The buyer must also be ready to pay with cash in hand. To top everything off, you'll get the property one-hundred percent as is. That possibly could include standing liens and even current tenants that need to be thrown out.
A REO, conversely, is a more tidy and attractive proposition. The REO property didn't find a buyer during foreclosure auction. Now the bank 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. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to make known any defects they are informed of.
Are REO's a bargain in Moore?
It's frequently assumed that any REO must be a good buy and an opportunity for easy money. This usually isn't true. You have to be very careful about buying a REO if your intent is make money. 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 contemplating 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. Still there are also many REO's that are not good buys and not likely to turn a profit.
Time to make an offer?
Most lenders have a REO department that you'll work with in 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 learn as much as you can about what they know regarding the condition of the property and what their process is for receiving offers. Since banks typically sell REO properties "as is", you may want 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. Once you've made your offer, you can expect the bank to counter offer. At this point it will be your decision whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be dealing with a process that probably 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.