Buying a foreclosure or REO property in
What is an REO?
REO's or Real Estate Owned are homes that have completed the foreclosure process which the bank or mortage company now holds. This differs from real estate 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 willing to pay with cash in hand. To top everything off, you'll receive the property entirely as is. That might comprise current liens and even current residents that need to be evicted.
A REO, on the contrary, is a much neater and attractive proposition. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The bank will deal with 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 not required to give a Transfer Disclosure Statement, a document that usually requires sellers to disclose any defects they are aware of.
Is an REO in Tulsa a bargain?
It's occasionally assumed that any REO must be a good buy and an possibility for easy money. This isn't always true. You have to be prudent about buying a REO if your intent is make money. While it's true that the bank is typically anxious to sell it promptly, they are also strongly motivated 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. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. But there are also many REO's that are not good buys and may not be money makers.
Time to make an offer?
Most banks 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 learn as much as you can about what they know regarding the condition of the property and what their process is for taking 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 unseen 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. Once you've submitted your offer, you can expect the bank to counter offer. From there 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 multiple people at the bank, and they don't work evenings or weekends. It's not unusual for the process of offers and counter offers to take days or even weeks.