Buying a foreclosure or REO property in

What is an REO?

REO's or Real Estate Owned are properties which have completed the foreclosure process and are presently held 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 accumulated during the foreclosure process. The buyer must also be ready to pay with cash in hand. Finally, you'll receive the property one-hundred percent as is. That could consist of prevailing liens and even current tenants that need to be kicked out.

A REO, on the other hand, is a much cleaner and attractive proposition. The REO property didn't find a buyer during foreclosure auction. The lender now owns it. The bank will take care of the removal of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing. Note that REOs may be exempt from standard disclosure requirements. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that usually requires sellers to make known any defects of which they are informed.

Is an REO in Tucumcari a bargain?

It is commonly believed that any REO must be a good buy and an opportunity for easy money. This isn't necessarily true. You have to be cautious about buying a REO if your intent is to make money off of it. While it's true that the bank is often anxious to sell it quickly, 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. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. However there are also many REO's that are not good buys and may lose money.

Prepared to make an offer?

Most mortgage companies have a REO department that you'll work with in buying a REO property from them. Commonly 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 concerning the condition of the property and what their process is for accepting offers. Since banks most commonly 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 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 made your offer, you can expect the bank to make a counter offer. From there it will be your choice whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be dealing 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.

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