Buying a foreclosure or REO property in
What's an REO?
REO is short for Real Estate Owned. These are properties which have been through foreclosure which the bank or mortage company now possesses. This is different than a property 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 accumulated during the foreclosure process. You must also be willing to pay with cash in hand. Finally, you'll get the property entirely as is. That may include existing liens and even current tenants that may require removal.
A REO, by contrast, is a more tidy and attractive deal. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The bank will attend to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Take notice that REOs may be exempt from typical disclosure requirements. For example, in California, banks are not required to give a Transfer Disclosure Statement, a document that normally requires sellers to reveal any defects they are knowledgeable of.
Are REO's a bargain in Tucumcari?
It is frequently believed that any REO must be a good deal and an opportunity for easy money. This isn't always true. You have to be cautious 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 quickly, they are also strongly motivated to get as much as they can for it. When pondering 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 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 banks have a REO department that you'll work with while 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 discover 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", it's often prudent to include an inspection contingency in your offer that gives you time to check for hidden damage and cancel 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. Once you've made your offer, you can expect the bank to counter offer. From there it will be your choice whether to accept their counter, or submit another counter offer. Understand, you'll be working with a process that generally involves multiple 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.