Looking for a foreclosure or REO property in ?
What's an REO?
REO's or Real Estate Owned are properties that have gone through foreclosure which the bank or mortage company presently holds. This is different than 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 added during the foreclosure process. You must also be ready to pay with cash in hand. And on top of all that, you'll accept the property one-hundred percent as is. That might consist of prevailing liens and even current occupants that need to be evicted.
A REO, by contrast, is a more tidy and attractive proposition. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will handle 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. Note that REOs may be exempt from typical disclosure requirements. For example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to disclose any defects they are knowledgeable of.
Are REO's a bargain in Burlington?
It's occasionally believed that any REO must be a bargain and an possibility for easy money. This isn't always true. You have to be cautious about buying a REO if your intent is make money. While it's true that the bank is usually anxious to sell it soon, 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. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. Still there are also many REO's that are not good buys and may lose money.
All set to make an offer?
Most mortgage companies have a REO department that you'll work with while 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. Prior to 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", you may want to include an inspection contingency in your offer that gives you time to check for unknown 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. Once 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 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 not uncommon for the process of offers and counter offers to take days or even weeks.