Buying a REO or foreclosure in Clayton
What's an REO?
REO means Real Estate Owned. These are homes which have been foreclosed upon and are now owned by the bank or mortgage company. This is different than real estate 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 accrued during the foreclosure process. The buyer must also be ready to pay with cash in hand. To top everything off, you'll accept the property completely as is. That may comprise existing liens and even current denizens that may require removal.
A REO, by contrast, is a much neater and attractive proposition. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The bank will attend to 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. Take notice that REOs may be exempt from normal disclosure requirements. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to disclose any defects of which they are aware.
Are REO's a bargain in Clayton?
It is frequently believed that any REO must be a good deal and an possibility for easy money. This isn't necessarily 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 usually anxious to sell it quickly, 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. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. But there are also many REO's that are not good buys and may not be money makers.
Ready to make an offer?
Most banks have a REO department that you'll work with while 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 taking offers. Since banks almost always 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, providing documentation of your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender. Once you've presented your offer, you can expect the bank to counter offer. From there it will be your choice whether to accept their counter, or make another counter offer. Realize, you'll be dealing with a process that generally involves multiple 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.