Buying a foreclosure or REO property in
What's an REO?
REO is short for Real Estate Owned. These are homes that have completed the foreclosure process and are now owned by the bank or mortgage company. 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 added during the foreclosure process. The buyer must also be ready to pay with cash in hand. And on top of all that, you'll accept the property completely as is. That may consist of prevailing liens and even current residents that may require expulsion.
A REO, on the other hand, is a more tidy and attractive deal. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The bank will see to 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. Take notice that REOs may be exempt from typical disclosure requirements. For instance, in Calfornia, banks are exempt from giving a Transfer Disclosure Statement, a document that ordinarily requires sellers to reveal any defects of which they are knowledgeable.
Is an REO in Columbus a bargain?
It's sometimes presume that any REO must be a steal and an possibility for easy money. This usually isn't true. You have to be cautious about buying a REO if your intent is profit from the sell. While it's true that the bank is often 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 foreclosures. Still there are also many REO's that are not good buys and not likely to turn a profit.
All set to make an offer?
Most mortgage companies have a REO department that you'll work with while 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. 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 about the condition of the property and what their process is for taking 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. Once you've presented your offer, you can expect the bank to make a counter offer. At this point it will be your choice whether to accept their counter, or submit another counter offer. Be aware, 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.