Buying a foreclosure or REO property in
What is an REO?
REO's or Real Estate Owned are homes which have been through foreclosure which the bank or mortage company presently owns. This is unlike 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. The buyer must also be prepared to pay with cash in hand. And on top of all that, you'll receive the property totally as is. That might consist of current liens and even current tenants that may require expulsion.
A REO, conversely, is a much cleaner and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. The bank now owns it. The lender will see to the elimination of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing. Note that REOs may be exempt from normal disclosure requirements. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to make known any defects they are informed of.
Is an REO in Orlando a bargain?
It's sometimes 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 soon, they are also strongly interested 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. The bargains with money making potential exist, and many people do very well buying and selling foreclosures. However there are also many REO's that are not good buys and not likely to turn a profit.
All set to make an offer?
Most banks have a REO department that you'll work with while 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. Prior to 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 receiving offers. Since banks most commonly sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unknown damage and retract the offer if you find it.
As with making any offer on real estate, your offer may be 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 your choice whether to accept their counter, or submit another counter offer. Realize, you'll be working with a process that usually involves a group of 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.