Buying a REO or foreclosure in Saint Cloud
What's an REO?
REO's or Real Estate Owned are houses that have been foreclosed upon and are now held by the bank or mortgage company. This is unlike 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 accrued during the foreclosure process. The buyer must also be willing to pay with cash in hand. Finally, you'll accept the property entirely as is. That possibly could include existing liens and even current occupants that may require expulsion.
A REO, by contrast, is a more tidy and attractive deal. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The bank will handle 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. Do be aware that REOs may be exempt from typical disclosure requirements. In California, for example, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to make known any defects of which they are knowledgeable.
Are REO's a bargain in Saint Cloud?
It is sometimes presume that any REO must be a good buy and an opportunity for easy money. This just isn't true. You have to be prudent about buying a REO if your intent is make money. While it's true that the bank is usually anxious to sell it soon, they are also strongly motivated 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 not likely to turn a profit.
Time to make an offer?
Most lenders have a REO department that you'll work with in buying a REO property from them. Usually 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 accepting offers. Since banks almost always 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 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. After you've made your offer, you can expect the bank to respond with a counter offer. At this point it will be your decision whether to accept their counter, or submit another counter offer. Understand, you'll be contending with a process that probably 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.