Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are houses which have been foreclosed upon and are now owned by the bank or mortgage company. This differs from 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 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 include prevailing liens and even current tenants that may require expulsion.
A REO, on the other hand, is a more tidy and attractive deal. The REO property didn't find a buyer during foreclosure auction. Now the bank owns it. The bank will see to 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 typical disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to make known any defects of which they are knowledgeable.
Are REO's a bargain in Rock Hill?
It's occasionally presume that any REO must be a bargain and an chance for easy money. This usually isn't true. You have to be prudent about buying a REO if your intent is profit from the sell. While it's true that the bank is often anxious to sell it fast, they are also strongly interested 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. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.
All set to make an offer?
Most lenders 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. 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 receiving offers. Since banks almost always 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, 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 made your offer, you can expect the bank to counter offer. Then it will be your decision whether to accept their counter, or make another counter offer. Realize, you'll be contending with a process that most likely 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.