Buying a foreclosure or REO property in
What is an REO?
REO is an abbreviation for Real Estate Owned. These are homes which have completed the foreclosure process and are presently owned by the bank or mortgage company. This differs from 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 prepared to pay with cash in hand. Finally, you'll receive the property totally as is. That could comprise current liens and even current denizens that need to be removed.
A REO, conversely, is a much neater and attractive transaction. The REO property was unable to find a buyer during foreclosure auction. Now the bank owns it. The lender will see to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. You should be aware 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 normally requires sellers to disclose any defects of which they are aware.
Is an REO in Atlanta a bargain?
It is commonly though that any REO must be a good deal and an possibility for easy money. This isn't always true. You have to be cautious about buying a REO if your intent is profit from the sell. While it's true that the bank is typically anxious to sell it quickly, they are also strongly interested 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.
Prepared to make an offer?
Most lenders 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 learn as much as you can about what they know about the condition of the property and what their process is for receiving 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 retract 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 make a counter offer. Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be dealing 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.