Looking for a foreclosure or REO property in ?
What's an REO?
REO means Real Estate Owned. These are homes which have completed the foreclosure process and are presently possessed by the bank or mortgage company. This is not the same as 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 accrued during the foreclosure process. You must also be willing to pay with cash in hand. Finally, you'll receive the property totally as is. That might include current liens and even current residents that need to be evicted.
A REO, by contrast, is a more tidy and attractive deal. The REO property didn't find a buyer during foreclosure auction. Now the bank owns it. The lender will attend to the removal of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing. Take notice that REOs may be exempt from normal disclosure requirements. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are informed of.
Is an REO in Columbus a bargain?
It's occasionally assumed that any REO must be a good deal and an opportunity for easy money. This usually isn't true. You have to be very careful 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 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. There are bargains with potential to make money, and many people do very well flipping 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 banks have a REO department that you'll work with while buying a 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 concerning the condition of the property and what their process is for receiving 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 unknown 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. After you've presented your offer, you can expect the bank to counter offer. From there it will be your choice whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be working with a process that generally involves multiple people at the bank, and they don't work evenings or weekends. It's quite common for the process of offers and counter offers to take days or even weeks.