Buying a REO or foreclosure in Covina
What's an REO?
REO means Real Estate Owned. These are houses that have completed the foreclosure process which the bank or mortage company currently holds. 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. The buyer must also be willing to pay with cash in hand. Finally, you'll receive the property entirely as is. That may consist of current liens and even current residents that need to be removed.
A REO, conversely, is a much cleaner and attractive deal. The REO property didn't find a buyer during foreclosure auction. The lender now owns it. The lender will take care of 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. You should 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 usually requires sellers to reveal any defects they are aware of.
Is an REO in Covina a bargain?
It is occasionally though that any REO must be a bargain and an possibility for easy money. This isn't necessarily true. You have to be cautious about buying a REO if your intent is profit from the sell. While it's true that the bank is usually anxious to sell it fast, they are also strongly encouraged 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.
Ready to make an offer?
Most mortgage companies 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. 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 getting 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 retract the offer if you find it.
As with making any offer on real estate, you'll make your offer 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 counter offer. Then it will be up to you to decide whether to accept their counter, or submit another counter offer. Realize, you'll be working with a process that probably involves multiple 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.