Purchasing REO property or a foreclosure?
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What is an REO?
"REO" or Real Estate Owned are homes which have completed the foreclosure process that the bank or mortgage company presently owns. This differs from 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 willing to pay with cash in hand. Finally, you'll accept the property totally as is. That could comprise of current liens and even current residents that need to be put out.
A bank-owned property, conversely, is a more tidy and attractive option. The REO property was unable to find a buyer during foreclosure auction. Now the bank owns it. The lender will handle the removal 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 normal disclosure requirements. For example, in North Carolina, it is optional for foreclosures to have a Property Disclosure Statement, a document that ordinarily requires sellers to make known any defects of which they are informed. By hiring Porto Real Estate Group, you can rest assured knowing all parties are fulfilling Connecticut state disclosure requirements.
Is REO property a bargain?
It is commonly presumed that any REO must be a good deal and an opportunity for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is to make money. Even though the bank is typically anxious to offload it soon, they are also looking to minimize any losses.
When contemplating the value of REO property, carefully analyze 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. Still, there are also many REOs that are not good buys and may not be money makers.
Ready to make an offer?
Most lenders have staff dedicated to REO that you'll work with in buying REO property from them. Usually 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 learn as much as you can about what they know regarding the condition of the property and what their process is for getting offers. Since banks usually sell REO properties "as is", it may be in your best interest to include an inspection contingency in your offer that gives you time to check for unknown damage and withdraw the offer if you find it. If, as a buyer, you can provide documentation demonstrating your ability to secure financing, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This holds for any type of real estate offer.)
After you've presented your offer, you can expect the bank to respond with a counter offer. At this point it will be up to you to decide whether to accept their counter, or make another counter offer. Your deal might be final in one 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. Porto Real Estate Group is used to working around the schedules of this type of seller and will do everything possible to ensure there are no undue delays.