Buying a foreclosure or REO property in
What is an REO?
REO is an abbreviation for Real Estate Owned. These are homes which have been through foreclosure and are now held by the bank or mortgage company. This is not the same as 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. You must also be ready to pay with cash in hand. And on top of all that, you'll receive the property totally as is. That possibly may include standing liens and even current residents that may require removal.
A REO, conversely, is a more tidy and attractive deal. The REO property didn't find a buyer during foreclosure auction. Now the bank owns it. The lender 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. You should be aware that REOs may be exempt from standard disclosure requirements. For instance, in Calfornia, banks are not required to give a Transfer Disclosure Statement, a document that normally requires sellers to make known any defects of which they are knowledgeable.
Are REO's a bargain in Saint Cloud?
It's commonly though that any REO must be a bargain and an opportunity for easy money. This isn't always 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 typically anxious to sell it soon, they are also strongly encouraged 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. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.
Prepared to make an offer?
Most banks have a REO department that you'll work with when 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 learn as much as you can about what they know concerning the condition of the property and what their process is for receiving 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 unseen damage and terminate the offer if you find it.
As with making any offer on real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, 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. From there it will be your decision whether to accept their counter, or offer a counter to the counter offer. Realize, you'll be working with a process that probably involves several 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.