Looking for a foreclosure or REO property in ?
What's an REO?
REO's or Real Estate Owned are homes which have been foreclosed upon and are currently owned 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 amassed during the foreclosure process. The buyer must also be ready to pay with cash in hand. Finally, you'll get the property one-hundred percent as is. That might include standing liens and even current residents that may require removal.
A REO, by contrast, is a much neater and attractive proposition. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The bank will deal with the removal of tax liens, evict occupants if needed and generally organize 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 do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to make known any defects they are informed of.
Are REO's a bargain in Covina?
It's occasionally believed that any REO must be a steal and an possibility for easy money. This isn't always 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 often anxious to sell it promptly, they are also strongly motivated to get as much as they can for it. When pondering 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. But there are also many REO's that are not good buys and not likely to turn a profit.
Time to make an offer?
Most banks have a REO department that you'll work with when 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 discover 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 usually sell REO properties "as is", you'll want to be sure and include an inspection contingency in your offer that gives you time to check for hidden damage and terminate 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 respond with a counter offer. Then it will be your choice whether to accept their counter, or submit another counter offer. Understand, you'll be working 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.