Buying a foreclosure or REO property in
What is an REO?
REO's or Real Estate Owned are houses that have completed the foreclosure process and are presently held 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 accumulated during the foreclosure process. You must also be prepared to pay with cash in hand. To top everything off, you'll receive the property totally as is. That may include prevailing liens and even current occupants that need to be put out.
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 deal with the removal of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing. You should be aware that REOs may be exempt from normal disclosure requirements. In California, for example, banks are not required to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to tell you about any defects they are aware of.
Are REO's a bargain in Grand Prairie?
It's occasionally though 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 usually anxious to sell it quickly, 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. There are bargains with potential to make money, and many people do very well buying foreclosures. However there are also many REO's that are not good buys and may not be money makers.
All set 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 taking 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 hidden damage and terminate 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. At this point it will be up to you to decide whether to accept their counter, or submit another counter offer. Understand, you'll be dealing with a process that usually involves multiple people at the bank, and they don't work evenings or weekends. It's typical for the process of offers and counter offers to take days or even weeks.