Looking for a foreclosure or REO property in ?
What's an REO?
REO is Real Estate Owned. These are properties which have completed the foreclosure process and are currently possessed by the bank or mortgage company. This is different than 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 accumulated during the foreclosure process. You must also be willing to pay with cash in hand. To top everything off, you'll accept the property totally as is. That possibly may comprise standing liens and even current denizens that may require removal.
A REO, on the other hand, is a much cleaner and attractive deal. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The lender will handle 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. Do be aware that REOs may be exempt from normal disclosure requirements. In California, for example, banks are not required 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 Covina a bargain?
It is sometimes assumed that any REO must be a good deal and an possibility for easy money. This simply isn't true. You have to be prudent about buying a REO if your intent is make money. While it's true that the bank is usually anxious to sell it quickly, 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 buying and selling foreclosures. However there are also many REO's that are not good buys and may lose money.
Ready to make an offer?
Most mortgage companies 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 concerning the condition of the property and what their process is for getting offers. Since banks almost always 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 submitted your offer, you can expect the bank to counter offer. At this point it will be your choice whether to accept their counter, or make another counter offer. Understand, 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 quite common for the process of offers and counter offers to take days or even weeks.