Buying REO Property or a Foreclosure
Foreclosed upon and bank owned property purchases require the assistance of an experience professional.
What is an REO?
House in Foreclosure
“REO” stands for Real Estate Owned. These are houses which have completed the foreclosure process that the bank or mortgage company presently owns. 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 added during the foreclosure process. The buyer must also be able to pay with cash in hand. Finally, you’ll receive the property entirely as is. That possibly may consist of current liens and even current denizens that may require eviction.
A bank-owned property, conversely, is a more tidy and attractive transaction. 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 arrange for the issuance of a title insurance policy to the buyer at closing.
Do be aware that REOs may be exempt from standard disclosure requirements. For instance, in California, banks do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to make known any defects they are aware of. By hiring Pinnacle Estate Properties, you can rest assured knowing all parties are fulfilling California state disclosure requirements.
Is REO property in Calabasas a bargain?
It’s frequently assumed that any REO must be a steal and an opportunity for guaranteed profit. This isn’t always the case. 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 typically eager to sell it fast, they are also motivated to get as much as they can for it.
Look closely at the listing and sales prices of competing homes in the neighborhood when considering the purchase of an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. But there are also many REOs that are not good buys and may not be money makers.
Ready to make an offer?
Most banks have staff dedicated to REO that you’ll work with in buying REO property from them. To get their properties advertised on the local MLS, the lender will typically use a listing agent.
Prior to making your offer, you’ll want to contact either the listing agent or REO department at the bank and discover as much as you can about what they know regarding the condition of the property and what their process is for receiving offers. Since banks most commonly sell REO properties “as is”, you’ll want to be sure and include an inspection contingency in your offer that gives you time to check for hidden damage and terminate the offer if you find it. As with making any offer on real estate, providing documentation showing your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender.
After you’ve submitted your offer, it’s customary for the bank to respond with a counter offer. Then it will be your choice whether to accept their counter, or submit another counter offer. Your transaction could be final in one day, but that’s rare. Since offers and counter offers usually give the other party a day or longer to respond (and employees at a bank don’t work nights or weekends) you could be looking at a week or longer.
