Looking for a foreclosure or REO property in ?
What's an REO?
REO's or Real Estate Owned are houses which have been foreclosed upon and are presently held 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 accumulated during the foreclosure process. You must also be willing to pay with cash in hand. Finally, you'll receive the property one-hundred percent as is. That possibly may comprise current liens and even current occupants that may require expulsion.
A REO, conversely, is a more tidy and attractive transaction. The REO property was unable to find a buyer during foreclosure auction. Now the bank owns it. The bank will deal with the elimination of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing. You should be aware that REOs may be exempt from standard disclosure requirements. For instance, in Calfornia, banks are not required to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to reveal any defects they are knowledgeable of.
Are REO's a bargain in Clayton?
It's sometimes assumed that any REO must be a good buy and an possibility for easy money. This isn't always true. You have to be prudent about buying a REO if your intent is to make money off of it. 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 not likely to turn a profit.
Prepared to make an offer?
Most lenders 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 typically sell REO properties "as is", you may want to include an inspection contingency in your offer that gives you time to check for hidden damage and retract the offer if you find it.
As with making any offer on real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. Once you've submitted your offer, you can expect the bank to make a counter offer. Then it will be your choice whether to accept their counter, or offer a counter to the counter offer. Be aware, 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 unusual for the process of offers and counter offers to take days or even weeks.