Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are homes that have been foreclosed upon which the bank or mortage company currently possesses. This differs from 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 amassed during the foreclosure process. You must also be willing to pay with cash in hand. Finally, you'll receive the property completely as is. That possibly could comprise current liens and even current occupants that need to be kicked out.
A REO, conversely, is a more tidy and attractive deal. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The lender will handle the removal of tax liens, evict occupants if needed and generally prepare 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. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that ordinarily requires sellers to reveal any defects of which they are aware.
Are REO's a bargain in Columbus?
It is sometimes believed that any REO must be a bargain and an possibility for easy money. This just isn't true. You have to be cautious about buying a REO if your intent is make money. While it's true that the bank is often anxious to sell it quickly, they are also strongly motivated 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. The bargains with money making potential exist, and many people do very well buying foreclosures. However there are also many REO's that are not good buys and may not be money makers.
Prepared to make an offer?
Most lenders 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. 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 concerning the condition of the property and what their process is for accepting offers. Since banks typically 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, 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. After you've made your offer, you can expect the bank to counter offer. Then it will be your choice whether to accept their counter, or submit another counter offer. Realize, 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 uncommon for the process of offers and counter offers to take days or even weeks.