Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are properties which have completed the foreclosure process which the bank or mortage company now holds. This is different than 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 amassed during the foreclosure process. The buyer must also be ready to pay with cash in hand. Finally, you'll receive the property one-hundred percent as is. That possibly will include current liens and even current denizens that need to be kicked out.
A REO, by contrast, is a more tidy and attractive option. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The bank will handle the elimination of tax liens, evict occupants if needed and generally organize 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 not required to give a Transfer Disclosure Statement, a document that usually requires sellers to tell you about any defects they are knowledgeable of.
Are REO's a bargain in Grand Prairie?
It is sometimes though that any REO must be a good deal and an chance for easy money. This isn't necessarily 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 typically anxious to sell it promptly, they are also strongly motivated 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. There are bargains with potential to make money, and many people do very well buying foreclosures. Still 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. Usually 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 discover 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", you may want to include an inspection contingency in your offer that gives you time to check for unknown 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. After you've presented your offer, you can expect the bank to counter offer. At this point it will be your decision whether to accept their counter, or offer a counter to the counter offer. Realize, you'll be dealing with a process that probably involves multiple people at the bank, and they don't work evenings or weekends. It's quite common for the process of offers and counter offers to take days or even weeks.