Buying a REO or foreclosure in Orlando

What's an REO?

REO stands for Real Estate Owned. These are homes that have completed the foreclosure process and are presently owned by the bank or mortgage company. This is unlike a property up for foreclosure auction. If you buy 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. To top everything off, you'll get the property one-hundred percent as is. That could comprise existing liens and even current residents that need to be thrown out.

A REO, conversely, is a much neater and attractive proposition. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The bank will attend to 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. Take notice that REOs may be exempt from typical disclosure requirements. For instance, in Calfornia, banks are exempt from giving a Transfer Disclosure Statement, a document that typically requires sellers to make known any defects they are knowledgeable of.

Is an REO in Orlando a bargain?

It is sometimes believed that any REO must be a good deal and an opportunity for easy money. This isn't always true. You have to be very careful about buying a REO if your intent is make a profit. While it's true that the bank is often anxious to sell it fast, they are also strongly encouraged 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. 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 lose money.

Time to make an offer?

Most mortgage companies have a REO department that you'll work with in buying a REO property from them. Typically 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 concerning the condition of the property and what their process is for getting 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 unseen damage and retract 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 counter offer. Then it will be your decision whether to accept their counter, or submit another 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.