Buying a foreclosure or REO property in
What's an REO?
REO is an abbreviation for Real Estate Owned. These are houses which have completed the foreclosure process and are now possessed by the bank or mortgage company. 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 prepared to pay with cash in hand. To top everything off, you'll receive the property totally as is. That may consist of existing liens and even current residents that need to be evicted.
A REO, by contrast, is a more tidy and attractive proposition. The REO property didn't find a buyer during foreclosure auction. The lender now owns it. The lender 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. Take notice that REOs may be exempt from normal disclosure requirements. For instance, in Calfornia, banks are not required to give 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 Tucumcari?
It is frequently believed that any REO must be a good buy and an possibility for easy money. This isn't always true. You have to be cautious about buying a REO if your intent is make money. While it's true that the bank is often anxious to sell it quickly, they are also strongly encouraged 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 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 lenders have a REO department that you'll work with when buying a REO property from them. Normally 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 almost always sell REO properties "as is", you may want to include an inspection contingency in your offer that gives you time to check for unseen damage and retract 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 presented your offer, you can expect the bank to counter offer. From there it will be up to you to decide whether to accept their counter, or submit another counter offer. Realize, you'll be working with a process that usually involves a group of 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.