Looking for a foreclosure or REO property in ?

What's an REO?

REO's or Real Estate Owned are homes which have completed the foreclosure process which the bank or mortage company now holds. This differs from real estate 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 willing to pay with cash in hand. Finally, you'll receive the property totally as is. That possibly may comprise prevailing liens and even current tenants that need to be evicted.

A REO, on the contrary, is a much cleaner and attractive deal. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The lender will take care of 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. You should be aware that REOs may be exempt from standard 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 informed.

Is an REO in San Diego a bargain?

It's frequently though that any REO must be a good buy and an opportunity for easy money. This just isn't 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 usually anxious to sell it quickly, 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. But there are also many REO's that are not good buys and may not be money makers.

Ready to make an offer?

Most lenders have a REO department that you'll work with while 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 find out as much as you can about what they know about the condition of the property and what their process is for getting offers. Since banks typically 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 hidden 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 made your offer, you can expect the bank to counter offer. From there it will be your choice whether to accept their counter, or submit another counter offer. Understand, you'll be working with a process that most likely involves a group of 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.