Buying a REO or foreclosure in Sarasota
What's an REO?
REO is an abbreviation for Real Estate Owned. These are homes which have been foreclosed upon which the bank or mortage company now owns. This is unlike a property up for foreclosure auction. If you buy 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. The buyer must also be ready to pay with cash in hand. Finally, you'll accept the property one-hundred percent as is. That possibly will comprise current liens and even current residents that need to be put out.
A REO, by contrast, is a much cleaner and attractive deal. The REO property didn't find a buyer during foreclosure auction. Now the bank owns it. The bank will see to the elimination of tax liens, evict occupants if needed and generally organize 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. For instance, in Calfornia, banks do not have to give a Transfer Disclosure Statement, a document that usually requires sellers to tell you about any defects of which they are informed.
Are REO's a bargain in Sarasota?
It is frequently presume that any REO must be a good buy and an chance for easy money. This simply isn't true. You have to be prudent about buying a REO if your intent is to make money off of it. While it's true that the bank is usually 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. There are bargains with potential to make money, and many people do very well flipping foreclosures. Still there are also many REO's that are not good buys and may not be money makers.
Ready 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. 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 regarding the condition of the property and what their process is for receiving offers. Since banks almost always 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 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 submit another counter offer. Understand, you'll be contending with a process that usually 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.