Buying a REO or foreclosure in Burlington
What is an REO?
REO means Real Estate Owned. These are properties that have been foreclosed upon and are presently possessed by the bank or mortgage company. This differs from 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 willing to pay with cash in hand. Finally, you'll accept the property completely as is. That may include prevailing liens and even current occupants that need to be removed.
A REO, conversely, is a much neater and attractive deal. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will see to 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. Do be aware that REOs may be exempt from typical disclosure requirements. For instance, in Calfornia, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to reveal any defects they are knowledgeable of.
Is an REO in Burlington a bargain?
It's frequently assumed that any REO must be a good deal and an opportunity for easy money. This isn't always true. You have to be prudent about buying a REO if your intent is make money. While it's true that the bank is typically anxious to sell it soon, they are also strongly motivated 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 foreclosures. But 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 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. Before making your offer, you'll want to contact either the listing agent or REO department at the bank and discover as much as you can about what they know about the condition of the property and what their process is for getting offers. Since banks almost always sell REO properties "as is", you'll want to be sure and 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 presented your offer, you can expect the bank to make a counter offer. At this point it will be your decision whether to accept their counter, or make another counter offer. Understand, you'll be contending with a process that usually involves several 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.