Looking for a foreclosure or REO property in ?
What is an REO?
REO's or Real Estate Owned are houses that have gone through foreclosure which the bank or mortage company currently possesses. This is not the same as 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 willing to pay with cash in hand. Finally, you'll receive the property completely as is. That could consist of standing liens and even current tenants that need to be removed.
A REO, by contrast, is a more tidy and attractive transaction. The REO property didn't find a buyer during foreclosure auction. The lender now owns it. The lender will see to the elimination of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing. Do be aware that REOs may be exempt from typical disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects of which they are knowledgeable.
Are REO's a bargain in San Diego?
It is sometimes though that any REO must be a steal and an possibility for easy money. This isn't necessarily true. You have to be cautious about buying a REO if your intent is make money. While it's true that the bank is often anxious to sell it promptly, 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 buying and selling foreclosures. But there are also many REO's that are not good buys and may lose money.
All set to make an offer?
Most mortgage companies 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 learn as much as you can about what they know regarding the condition of the property and what their process is for getting 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 unseen damage and cancel 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. 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 working with a process that generally involves several 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.