Buying a foreclosure or REO property in
What's an REO?
REO stands for Real Estate Owned. These are properties which have completed the foreclosure process which the bank or mortage company now possesses. This is different than 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. The buyer must also be ready to pay with cash in hand. And on top of all that, you'll receive the property totally as is. That possibly may include prevailing liens and even current tenants that may require eviction.
A REO, on the other hand, is a much neater and attractive transaction. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The bank will take care of 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. Take notice that REOs may be exempt from normal 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 knowledgeable.
Is an REO in Rock Hill a bargain?
It's commonly believed that any REO must be a steal and an opportunity for easy money. This isn't always true. You have to be prudent 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 interested 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. However there are also many REO's that are not good buys and not likely to turn a profit.
Time 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. Before making your offer, you'll want to contact either the listing agent or REO department at the bank and discover 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 most commonly 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 terminate 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. After you've submitted your offer, you can expect the bank to respond with a counter offer. At this point it will be your decision whether to accept their counter, or make another counter offer. Realize, you'll be dealing 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.