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Buying a foreclosure or REO property in

What is an REO?

REO's or Real Estate Owned are houses which have been foreclosed upon and are currently possessed by the bank or mortgage company. 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 accumulated during the foreclosure process. The buyer must also be prepared to pay with cash in hand. To top everything off, you'll receive the property totally as is. That might consist of prevailing liens and even current denizens that may require removal.

A REO, conversely, is a much cleaner and attractive transaction. 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. Take notice that REOs may be exempt from standard disclosure requirements. For instance, in Calfornia, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to make known any defects they are informed of.

Are REO's a bargain in Delray Beach?

It is occasionally assumed that any REO must be a steal and an opportunity for easy money. This isn't always true. You have to be cautious about buying a REO if your intent is make a profit. While it's true that the bank is often anxious to sell it soon, 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. It is possible to find REOs with money-making potential, and many people do very well flipping 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 mortgage companies have a REO department that you'll work with when buying a REO property from them. Normally 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 accepting 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 cancel the offer if you find it.

As with making any offer on real estate, providing documentation of your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender. Once you've made your offer, you can expect the bank to counter offer. From there it will be up to you to decide whether to accept their counter, or make another counter offer. Realize, you'll be dealing with a process that generally involves a group of 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.

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