Looking for a foreclosure or REO property in ?
What's an REO?
REO's or Real Estate Owned are properties that have been through foreclosure which the bank or mortage company presently owns. This is different than real estate 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 amassed during the foreclosure process. You must also be willing to pay with cash in hand. Finally, you'll receive the property totally as is. That might include existing liens and even current residents that need to be removed.
A REO, by contrast, is a much neater and attractive transaction. The REO property was unable to find a buyer during foreclosure auction. The bank now owns it. The lender will attend to the removal 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 standard disclosure requirements. For example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to reveal any defects they are aware of.
Are REO's a bargain in Sarasota?
It's frequently though that any REO must be a good buy and an chance for easy money. This isn't necessarily true. You have to be very careful 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 quickly, they are also strongly encouraged to get as much as they can for it. When pondering 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 and selling foreclosures. But there are also many REO's that are not good buys and may lose money.
Ready to make an offer?
Most mortgage companies have a REO department that you'll work with in 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 discover as much as you can about what they know regarding the condition of the property and what their process is for accepting offers. Since banks most commonly 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 withdraw 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 submitted your offer, you can expect the bank to counter offer. At this point it will be up to you to decide whether to accept their counter, or submit another counter offer. Be aware, you'll be working with a process that generally involves multiple 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.