Looking for a foreclosure or REO property in ?
What is an REO?
REO is an abbreviation for Real Estate Owned. These are homes that have been through foreclosure and are currently owned by the bank or mortgage company. This differs from 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 amassed during the foreclosure process. The buyer must also be able to pay with cash in hand. To top everything off, you'll get the property entirely as is. That may include current liens and even current occupants that may require removal.
A REO, conversely, is a much cleaner and attractive proposition. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The bank will deal with the removal of tax liens, evict occupants if needed and generally prepare 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 example, in California, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to reveal any defects of which they are informed.
Is an REO in Auburn a bargain?
It's frequently believed that any REO must be a bargain and an opportunity for easy money. This just isn't true. You have to be prudent about buying a REO if your intent is make a profit. While it's true that the bank is usually anxious to sell it quickly, they are also strongly interested 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. The bargains with money making potential exist, and many people do very well flipping foreclosures. However there are also many REO's that are not good buys and not likely to turn a profit.
Time to make an offer?
Most lenders have a REO department that you'll work with in buying a REO property from them. Commonly the REO department will use a listing agent to get their REO properties listed on the local MLS. Prior to 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 receiving 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 unknown damage and withdraw the offer if you find it.
As with making any offer on real estate, your offer may be more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. Once you've made your offer, you can expect the bank to make a counter offer. Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Be aware, you'll be dealing with a process that probably involves multiple people at the bank, and they don't work evenings or weekends. It's not unusual for the process of offers and counter offers to take days or even weeks.