Buying a foreclosure or REO property in
What's an REO?
REO is Real Estate Owned. These are homes that have been foreclosed upon and are presently possessed by the bank or mortgage company. 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 added during the foreclosure process. The buyer must also be willing to pay with cash in hand. Finally, you'll receive the property entirely as is. That possibly will comprise prevailing liens and even current denizens that need to be expelled.
A REO, on the contrary, is a much cleaner and attractive option. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The lender will deal with the removal 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 instance, in Calfornia, banks are exempt from giving a Transfer Disclosure Statement, a document that typically requires sellers to make known any defects of which they are knowledgeable.
Is an REO in Burlington a bargain?
It is frequently though that any REO must be a good deal and an chance for easy money. This isn't necessarily true. You have to be very careful about buying a REO if your intent is make a profit. While it's true that the bank is typically anxious to sell it quickly, 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. The bargains with money making potential exist, and many people do very well buying foreclosures. Still there are also many REO's that are not good buys and not likely to turn a profit.
All set to make an offer?
Most lenders have a REO department that you'll work with when buying a REO property from them. Typically 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 concerning the condition of the property and what their process is for taking 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 hidden damage and withdraw 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. After you've presented your offer, you can expect the bank to counter offer. At this point it will be your choice whether to accept their counter, or make another counter offer. Be aware, you'll be working with a process that generally 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.