Looking for a foreclosure or REO property in ?
What's an REO?
REO is an abbreviation for Real Estate Owned. These are properties which have been through foreclosure and are presently owned 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 accumulated during the foreclosure process. The buyer must also be ready to pay with cash in hand. Finally, you'll get the property totally as is. That could include standing liens and even current denizens that need to be put out.
A REO, on the other hand, is a much neater and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank will take care of the elimination of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing. Note that REOs may be exempt from standard disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that ordinarily requires sellers to tell you about any defects they are informed of.
Is an REO in Saint Cloud a bargain?
It is frequently assumed that any REO must be a good buy and an possibility for easy money. This usually isn't 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 considering 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 flipping foreclosures. But there are also many REO's that are not good buys and may lose money.
Prepared to make an offer?
Most mortgage companies 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 find out as much as you can about what they know concerning the condition of the property and what their process is for accepting offers. Since banks typically sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for hidden damage and cancel 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. Once you've submitted your offer, you can expect the bank to counter offer. Then it will be your decision whether to accept their counter, or submit another counter offer. Understand, you'll be contending with a process that usually involves a group of 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.