Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are properties which have completed the foreclosure process and are now held by the bank or mortgage company. 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 amassed during the foreclosure process. The buyer must also be willing to pay with cash in hand. To top everything off, you'll receive the property totally as is. That could consist of current liens and even current denizens that need to be expelled.
A REO, conversely, is a much neater and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. Now the bank 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 normal disclosure requirements. For instance, in Calfornia, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects of which they are aware.
Is an REO in Atlanta a bargain?
It is sometimes though that any REO must be a good deal and an possibility for easy money. This isn't always true. You have to be very careful about buying a REO if your intent is make a profit. While it's true that the bank is typically anxious to sell it promptly, they are also strongly interested 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 foreclosures. Still there are also many REO's that are not good buys and may not be money makers.
Prepared to make an offer?
Most lenders have a REO department that you'll work with in 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. Before 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 receiving offers. Since banks usually sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unknown 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. After you've made your offer, you can expect the bank to counter offer. From there it will be your choice whether to accept their counter, or offer a counter to the counter offer. Be aware, 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 quite common for the process of offers and counter offers to take days or even weeks.