Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are homes which have gone through foreclosure and are presently possessed by the bank or mortgage company. This is different than 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. The buyer must also be ready to pay with cash in hand. And on top of all that, you'll receive the property totally as is. That possibly may comprise current liens and even current occupants that may require eviction.
A REO, on the contrary, is a much neater and attractive deal. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The lender will handle the elimination 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 normal disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects of which they are informed.
Are REO's a bargain in Fort Pierce?
It's commonly believed that any REO must be a good deal and an chance for easy money. This isn't always true. You have to be cautious about buying a REO if your intent is make a profit. While it's true that the bank is often anxious to sell it promptly, they are also strongly motivated 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 foreclosures. But there are also many REO's that are not good buys and may not be money makers.
Prepared to make an offer?
Most banks 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 discover as much as you can about what they know concerning the condition of the property and what their process is for taking 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 unseen damage and withdraw the offer if you find it.
As with making any offer on real estate, providing documentation of your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender. After you've submitted 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 make another counter offer. Understand, you'll be contending with a process that probably involves multiple people at the bank, and they don't work evenings or weekends. It's not uncommon for the process of offers and counter offers to take days or even weeks.