Looking for a foreclosure or REO property in ?
What is an REO?
REO's or Real Estate Owned are houses which have been foreclosed upon and are presently held by the bank or mortgage company. 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 accrued during the foreclosure process. You must also be ready to pay with cash in hand. Finally, you'll get the property one-hundred percent as is. That possibly will comprise existing liens and even current denizens that need to be thrown out.
A REO, on the other hand, is a much cleaner and attractive proposition. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The bank will attend to 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 typical disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to make known any defects of which they are aware.
Are REO's a bargain in Palos Verdes Estates?
It is commonly presume that any REO must be a steal 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 a profit. While it's true that the bank is usually anxious to sell it soon, they are also strongly encouraged 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 flipping foreclosures. However there are also many REO's that are not good buys and may lose money.
All set to make an offer?
Most lenders have a REO department that you'll work with when 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 discover as much as you can about what they know regarding the condition of the property and what their process is for accepting offers. Since banks almost always sell REO properties "as is", you may want 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. Then it will be your choice whether to accept their counter, or offer a counter to the counter offer. Be aware, you'll be working with a process that generally involves several 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.