Buying a REO or foreclosure in Burlington
What is an REO?
REO's or Real Estate Owned are properties that have been through foreclosure which the bank or mortage company now holds. 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 amassed during the foreclosure process. You must also be willing to pay with cash in hand. Finally, you'll receive the property completely as is. That may consist of prevailing liens and even current residents that may require removal.
A REO, on the other hand, is a much cleaner and attractive transaction. The REO property was unable to find a buyer during foreclosure auction. The bank now owns it. The lender will attend to the elimination of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Take notice 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 typically requires sellers to tell you about any defects of which they are aware.
Are REO's a bargain in Burlington?
It is occasionally assumed that any REO must be a steal and an chance for easy money. This isn't always 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 often anxious to sell it soon, 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. 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 not be money makers.
Prepared 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 most commonly sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unseen 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 decision whether to accept their counter, or make another counter offer. Realize, you'll be working 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.