Interested in REO property or a foreclosure?
Smart consumers will turn to a seasoned pro when considering a foreclosed property.
What is an REO?
"REO" is Real Estate Owned. These are houses which have been through foreclosure that the bank or mortgage company currently possesses. 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 added during the foreclosure process. You must also be ready to pay with cash in hand. And on top of all that, you'll get the property totally as is. That may include current liens and even current residents that need to be put out.
A bank-owned property, on the contrary, is a more tidy and attractive transaction. The REO property was unable to find a buyer during foreclosure auction. Now the bank owns it. The lender will deal with 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.
Note 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 usually requires sellers to tell you about any defects of which they are knowledgeable. By hiring Sanborn Financial, you can rest assured knowing all parties are fulfilling California state disclosure requirements.
Are REO properties a bargain?
It is sometimes presumed that any REO must be a good deal and a possibility for easy money. This simply isn't true. You have to be prudent about buying a REO if your intent is to profit from the sale. Even though the bank is usually anxious to offload it promptly, they are also looking to get as much as they can for it.
Look carefully at the listing and sales prices of competing homes in the neighborhood when making an offer on an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in. It is possible to find REOs with money-making potential, and many people do very well buying foreclosures. Still, there are also many REOs that are not good buys and may lose money.
Ready to make an offer?
Most banks have staff dedicated to REO that you'll work with while buying REO property from them. To get their properties advertised on the local MLS, the lender will often use a listing agent.
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 their knowledge concerning 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 terminate 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 presented your offer, you can expect the bank to respond with a counter offer. Then it will be up to you to decide whether to accept their counter, or make another counter offer. Your transaction could be final in a single day, but that's rare. Since offers and counter offers usually allow a day or more for the other party to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer. Sanborn Financial is used to working around the schedules of this type of seller and will do everything possible to ensure there are no unnecessary delays.