Looking for a foreclosure or REO property in ?
What's an REO?
REO's or Real Estate Owned are houses which have completed the foreclosure process which the bank or mortage company currently holds. This differs from 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 added during the foreclosure process. The buyer must also be able to pay with cash in hand. To top everything off, you'll accept the property one-hundred percent as is. That could include prevailing liens and even current residents that may require expulsion.
A REO, on the contrary, is a more tidy and attractive deal. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank will see to 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. Take notice that REOs may be exempt from standard disclosure requirements. In California, for example, banks are not required to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to reveal any defects they are informed of.
Are REO's a bargain in Murphy?
It's sometimes assumed that any REO must be a bargain and an opportunity for easy money. This isn't necessarily true. You have to be very careful 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 promptly, 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. It is possible to find REOs with money-making potential, and many people do very well buying and selling foreclosures. Still there are also many REO's that are not good buys and not likely to turn a profit.
Time to make an offer?
Most banks have a REO department that you'll work with when 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. Before making your offer, you'll want to contact either the listing agent or REO department at the bank and learn as much as you can about what they know about the condition of the property and what their process is for taking offers. Since banks usually sell REO properties "as is", you'll want to be sure and 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 submitted your offer, you can expect the bank to counter offer. At this point it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Realize, you'll be contending with a process that generally involves a group of people at the bank, and they don't work evenings or weekends. It's quite common for the process of offers and counter offers to take days or even weeks.