Buying a REO or foreclosure in Delray Beach
What is an REO?
REO's or Real Estate Owned are homes which have been foreclosed upon which the bank or mortage company presently possesses. This is not the same as 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 able to pay with cash in hand. To top everything off, you'll accept the property completely as is. That possibly could comprise prevailing liens and even current residents that may require eviction.
A REO, by contrast, is a much cleaner and attractive deal. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The lender will take care of the elimination of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing. Take notice that REOs may be exempt from normal disclosure requirements. For instance, in Calfornia, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to disclose any defects of which they are informed.
Are REO's a bargain in Delray Beach?
It is frequently assumed that any REO must be a good buy and an possibility for easy money. This isn't always true. You have to be very careful about buying a REO if your intent is to make money off of it. While it's true that the bank is often anxious to sell it fast, they are also strongly motivated to get as much as they can for it. When considering 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 flipping foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.
All set to make an offer?
Most banks have a REO department that you'll work with when 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 concerning the condition of the property and what their process is for taking offers. Since banks most commonly 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 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 submitted your offer, you can expect the bank to make a counter offer. From there it will be your choice whether to accept their counter, or offer a counter to the counter offer. Be aware, you'll be dealing with a process that most likely involves a group of people at the bank, and they don't work evenings or weekends. It's typical for the process of offers and counter offers to take days or even weeks.