Buying a REO or foreclosure in Covina
What is an REO?
REO means Real Estate Owned. These are houses that have been foreclosed upon which the bank or mortage company now holds. This is not the same as a property 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 amassed during the foreclosure process. You must also be able to pay with cash in hand. And on top of all that, you'll accept the property one-hundred percent as is. That might comprise existing liens and even current occupants that need to be thrown out.
A REO, on the contrary, 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 attend to 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. Note that REOs may be exempt from typical disclosure requirements. For instance, in Calfornia, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are knowledgeable of.
Are REO's a bargain in Covina?
It's sometimes presume that any REO must be a good deal and an opportunity for easy money. This usually isn't true. You have to be very careful about buying a REO if your intent is make a profit. While it's true that the bank is typically anxious to sell it soon, 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. There are bargains with potential to make money, and many people do very well buying foreclosures. But 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. 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 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 unseen damage and retract 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 presented your offer, you can expect the bank to counter offer. At this point it will be your decision whether to accept their counter, or offer a counter to the counter offer. Realize, you'll be dealing with a process that probably 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.