Buying a REO or foreclosure in Covina
What is an REO?
REO's or Real Estate Owned are homes which have been foreclosed upon which the bank or mortage company now possesses. This differs from 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. You must also be prepared to pay with cash in hand. To top everything off, you'll receive the property entirely as is. That possibly could comprise current liens and even current occupants that need to be evicted.
A REO, by contrast, is a much neater and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank will take care of the elimination of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing. You should be aware that REOs may be exempt from standard disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that ordinarily requires sellers to tell you about any defects they are informed of.
Are REO's a bargain in Covina?
It's occasionally presume that any REO must be a steal and an possibility for easy money. This isn't necessarily 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 typically anxious to sell it quickly, they are also strongly interested 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. The bargains with money making potential exist, and many people do very well buying foreclosures. However there are also many REO's that are not good buys and may not be money makers.
Ready to make an offer?
Most lenders have a REO department that you'll work with in 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. 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 usually sell REO properties "as is", it's often prudent 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, 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 submitted your offer, you can expect the bank to counter offer. From there it will be your decision whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be dealing with a process that usually 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.