Buying REO property or a foreclosure?

	Foreclosed upon and bank owned property purchases require the assistance of an experience professional. For more information, you can contact me through my site or  email me. I'm glad to answer questions you have about real estate foreclosures.

What is an REO?

"REO" or Real Estate Owned are houses which have gone through foreclosure and are now 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 accumulated during the foreclosure process. You must also be able to pay with cash in hand. Finally, you'll accept the property completely as is. That possibly may involve current liens and even current residents that need to be removed. 

A bank-owned property, conversely, is a more tidy and attractive deal. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank will see to 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 standard disclosure requirements. For example, in Nevada, it is optional for foreclosures to have a Property Disclosure Statement, a document that usually requires sellers to tell you about any defects they are knowledgeable of. By hiring Ingrid Davis (DRE#01298353), you can rest assured knowing all parties are fulfilling California state disclosure requirements.

Are REO properties a bargain in Southern California?
It's occasionally presumed that any REO must be a bargain and a chance for guaranteed profit. This frequently isn't true. You have to be prudent about buying a REO if your intent is profit from the sale. While it's true that the bank is usually eager to sell it fast, they are also looking to minimize any losses. 

Look carefully at the listing and sales prices of similar homes in the neighborhood when considering the purchase of an REO. And factor in any repairs or remodeling necessary to prepare the house for resale or moving in. The bargains with money making potential exist, and many people do very well flipping foreclosures. However there are also many REOs that are not good buys and may not be money makers.

All set to make an offer?
Most banks have staff dedicated to REO that you'll work with when buying REO property from them. To get their properties advertised on the local MLS, the lender will frequently use a listing agent. 

Before making your offer, you'll want to contact either the listing agent or REO department at the bank and find out as much as you can about what they know concerning the condition of the property and what their process is for receiving offers. Since banks typically sell REO properties "as is", you may want 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. If, as a buyer, you can provide documentation showing your ability to secure financing, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This is generally true for any type of real estate offer.)

Once you've made your offer, you can expect the bank to make a counter offer. From there it will be your decision whether to accept their counter, or make another counter offer. Be aware, you'll be dealing with a process that generally involves several 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.