Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are homes that have completed the foreclosure process and are presently held by the bank or mortgage company. 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 accumulated during the foreclosure process. The buyer must also be able to pay with cash in hand. To top everything off, you'll receive the property entirely as is. That possibly may comprise current liens and even current tenants that need to be kicked out.
A REO, on the other hand, 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 elimination of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing. Do be aware that REOs may be exempt from normal disclosure requirements. For instance, in Calfornia, banks are exempt from giving a Transfer Disclosure Statement, a document that ordinarily requires sellers to make known any defects of which they are informed.
Are REO's a bargain in Tulsa?
It is sometimes though that any REO must be a bargain and an opportunity for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is make a profit. While it's true that the bank is typically anxious to sell it soon, they are also strongly interested to get as much as they can for it. When contemplating 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. However there are also many REO's that are not good buys and may not be money makers.
Time to make an offer?
Most mortgage companies have a REO department that you'll work with in buying a REO property from them. Typically 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 about 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 unknown damage and retract the offer if you find it.
As with making any offer on real estate, you'll make your offer 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 counter offer. From there it will be up to you to decide whether to accept their counter, or submit another counter offer. Understand, you'll be working with a process that usually involves a group of people at the bank, and they don't work evenings or weekends. It's not uncommon for the process of offers and counter offers to take days or even weeks.