Buying a REO or foreclosure in Clayton
What's an REO?
REO is an abbreviation for Real Estate Owned. These are homes that have completed the foreclosure process which the bank or mortage company now possesses. This differs from 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 prepared to pay with cash in hand. To top everything off, you'll get the property one-hundred percent as is. That possibly may comprise prevailing liens and even current denizens that may require expulsion.
A REO, on the contrary, is a much cleaner and attractive proposition. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The bank will handle 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 typical disclosure requirements. For instance, in Calfornia, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to reveal any defects they are aware of.
Are REO's a bargain in Clayton?
It's commonly presume that any REO must be a bargain and an opportunity for easy money. This usually isn't 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 usually 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. The bargains with money making potential exist, and many people do very well buying and selling 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 in 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 regarding the condition of the property and what their process is for accepting offers. Since banks typically 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 hidden damage and retract 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 respond with a counter offer. Then it will be your choice whether to accept their counter, or submit another counter offer. Be aware, you'll be dealing with a process that usually 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.