Buying a REO or foreclosure in Orlando
What's an REO?
REO's or Real Estate Owned are houses which have been through foreclosure 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 accumulated during the foreclosure process. You must also be able to pay with cash in hand. To top everything off, you'll receive the property totally as is. That possibly may consist of prevailing liens and even current denizens that need to be thrown out.
A REO, conversely, is a more tidy and attractive option. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The lender 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. Take notice that REOs may be exempt from typical disclosure requirements. For example, in California, banks do not have to give a Transfer Disclosure Statement, a document that usually requires sellers to reveal any defects they are informed of.
Is an REO in Orlando a bargain?
It's occasionally though that any REO must be a steal 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 money. While it's true that the bank is often anxious to sell it fast, they are also strongly motivated 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. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. However 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 when buying a REO property from them. Normally 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 find out as much as you can about what they know regarding the condition of the property and what their process is for receiving offers. Since banks most commonly 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 hidden damage and cancel 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. Once you've presented 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 make another counter offer. Understand, you'll be contending with a process that generally involves several 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.