Buying a REO or foreclosure in Auburn

What is an REO?

REO means Real Estate Owned. These are houses which have been foreclosed upon which the bank or mortage company now 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 willing to pay with cash in hand. To top everything off, you'll get the property totally as is. That possibly may include existing liens and even current residents that need to be expelled.

A REO, conversely, is a more tidy and attractive option. The REO property was unable to find a buyer during foreclosure auction. The bank now owns it. The lender will take care of the removal of tax liens, evict occupants if needed and generally arrange 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 example, in California, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to disclose any defects of which they are aware.

Are REO's a bargain in Auburn?

It is commonly believed that any REO must be a steal and an possibility for easy money. This isn't always true. You have to be cautious about buying a REO if your intent is make money. While it's true that the bank is often anxious to sell it promptly, they are also strongly encouraged 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. Still there are also many REO's that are not good buys and may not be money makers.

Ready to make an offer?

Most lenders 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 discover as much as you can about what they know about the condition of the property and what their process is for accepting offers. Since banks almost always 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 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 make a counter offer. From there it will be your decision whether to accept their counter, or submit another counter offer. Understand, you'll be contending with a process that usually involves a group of 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.

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