Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are properties that have been foreclosed upon which the bank or mortage company now 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 accumulated during the foreclosure process. The buyer must also be prepared to pay with cash in hand. Finally, you'll get the property completely as is. That possibly may comprise prevailing liens and even current occupants that need to be expelled.
A REO, by contrast, is a much cleaner and attractive deal. The REO property was unable to find a buyer during foreclosure auction. Now the lender 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. Do be aware that REOs may be exempt from typical disclosure requirements. For example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to make known any defects they are knowledgeable of.
Is an REO in Delray Beach a bargain?
It is sometimes presume that any REO must be a bargain and an possibility for easy money. This usually 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 usually anxious to sell it soon, they are also strongly interested 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. However there are also many REO's that are not good buys and may lose money.
Prepared to make an offer?
Most banks have a REO department that you'll work with while 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 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 almost always sell REO properties "as is", it may be in your best interest 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.
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 respond with a counter offer. Then it will be your decision whether to accept their counter, or submit another counter offer. Realize, you'll be dealing with a process that usually involves a group of 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.