Buying a foreclosure or REO property in

What's an REO?

REO's or Real Estate Owned are properties that have completed the foreclosure process and are presently owned by the bank or mortgage company. This is not the same as 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 accrued during the foreclosure process. You must also be willing to pay with cash in hand. And on top of all that, you'll receive the property completely as is. That could include current liens and even current occupants that may require eviction.

A REO, conversely, is a more tidy and attractive transaction. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank will handle the removal of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing. You should be aware that REOs may be exempt from typical disclosure requirements. For instance, in Calfornia, banks are not required to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to disclose any defects they are informed of.

Are REO's a bargain in Muskogee?

It is commonly believed that any REO must be a good buy and an possibility for easy money. This usually isn't true. You have to be very careful about buying a REO if your intent is to make money off of it. While it's true that the bank is typically anxious to sell it soon, 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. It is possible to find REOs with money-making potential, and many people do very well buying foreclosures. However there are also many REO's that are not good buys and not likely to turn a profit.

Prepared to make an offer?

Most mortgage companies have a REO department that you'll work with while 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. Prior to 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 concerning the condition of the property and what their process is for getting offers. Since banks usually sell REO properties "as is", you may want to include an inspection contingency in your offer that gives you time to check for unknown damage and cancel the offer if you find it.

As with making any offer on real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. After you've presented your offer, you can expect the bank to respond with a 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 not unusual for the process of offers and counter offers to take days or even weeks.


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