Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are homes which have completed the foreclosure process and are now owned by the bank or mortgage company. This is unlike 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 prepared to pay with cash in hand. Finally, you'll receive the property one-hundred percent as is. That possibly will comprise prevailing liens and even current denizens that may require eviction.
A REO, by contrast, is a more tidy and attractive option. The REO property didn't find a buyer during foreclosure auction. The lender now owns it. The bank will attend 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. Take notice that REOs may be exempt from standard disclosure requirements. For example, in California, banks do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects of which they are informed.
Are REO's a bargain in Muskogee?
It is frequently believed that any REO must be a good buy and an possibility for easy money. This just isn't true. You have to be very careful about buying a REO if your intent is make money. 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 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.
All set 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 regarding the condition of the property and what their process is for accepting offers. Since banks almost always 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 withdraw 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. After you've submitted your offer, you can expect the bank to make a counter offer. At this point it will be up to you to decide whether to accept their counter, or submit another counter offer. Realize, you'll be working with a process that probably 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.