Buying a REO or foreclosure in Burlington
What's an REO?
REO's or Real Estate Owned are houses which have completed the foreclosure process which the bank or mortage company now possesses. This is not the same as 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 get the property completely as is. That possibly could include existing liens and even current denizens that may require expulsion.
A REO, by contrast, is a much cleaner and attractive transaction. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The lender will take care of the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Note that REOs may be exempt from standard disclosure requirements. For example, in California, banks are not required to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to make known any defects they are knowledgeable of.
Are REO's a bargain in Burlington?
It's commonly presume that any REO must be a good buy and an chance for easy money. This isn't always true. You have to be cautious about buying a REO if your intent is to make money off of it. While it's true that the bank is usually anxious to sell it soon, they are also strongly encouraged 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. The bargains with money making potential exist, and many people do very well buying foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.
Prepared to make an offer?
Most banks 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. Prior to 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 about the condition of the property and what their process is for accepting offers. Since banks most commonly 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, your offer may be more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. After you've submitted your offer, you can expect the bank to counter offer. From there it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Be aware, you'll be working with a process that usually involves a group of people at the bank, and they don't work evenings or weekends. It's not unusual for the process of offers and counter offers to take days or even weeks.