Buying a foreclosure or REO property in
What is an REO?
REO's or Real Estate Owned are homes that have been foreclosed upon and are currently owned by the bank or mortgage company. This is not the same as 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 prepared to pay with cash in hand. To top everything off, you'll receive the property one-hundred percent as is. That could comprise current liens and even current residents that may require expulsion.
A REO, on the other hand, is a much cleaner and attractive option. The REO property was unable to find a buyer during foreclosure auction. Now the bank owns it. The bank 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 standard disclosure requirements. For instance, in Calfornia, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to make known any defects of which they are aware.
Are REO's a bargain in San Antonio?
It's commonly though that any REO must be a good buy and an chance for easy money. This simply isn't true. You have to be prudent about buying a REO if your intent is profit from the sell. While it's true that the bank is typically anxious to sell it fast, they are also strongly motivated 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. 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 not likely to turn a profit.
Prepared to make an offer?
Most lenders 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 find out as much as you can about what they know regarding the condition of the property and what their process is for taking offers. Since banks usually 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 terminate 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 respond with a counter offer. At this point it will be your choice whether to accept their counter, or submit another 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.