Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are properties which have gone through foreclosure which the bank or mortage company currently owns. This is unlike 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 accrued during the foreclosure process. You must also be able to pay with cash in hand. And on top of all that, you'll get the property one-hundred percent as is. That might consist of current liens and even current occupants that need to be evicted.
A REO, by contrast, is a much cleaner and attractive option. The REO property was unable to find a buyer during foreclosure auction. The bank now owns it. The bank will attend to the removal of tax liens, evict occupants if needed and generally organize 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 are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to make known any defects they are informed of.
Is an REO in Tucumcari a bargain?
It's occasionally assumed that any REO must be a bargain and an possibility for easy money. This just isn't true. You have to be cautious about buying a REO if your intent is make money. While it's true that the bank is typically anxious to sell it fast, they are also strongly interested 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. 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 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. Before 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 getting 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 unseen damage and withdraw 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 counter offer. At this point it will be your choice whether to accept their counter, or make another counter offer. Understand, 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 typical for the process of offers and counter offers to take days or even weeks.