Looking for a foreclosure or REO property in ?
What's an REO?
REO is an abbreviation for Real Estate Owned. These are houses which have been foreclosed upon and are now possessed by the bank or mortgage company. This is unlike 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 added during the foreclosure process. You must also be prepared to pay with cash in hand. And on top of all that, you'll get the property entirely as is. That could consist of current liens and even current occupants that need to be thrown out.
A REO, conversely, is a much neater and attractive option. The REO property didn't find a buyer during foreclosure auction. Now the bank owns it. The bank will deal with 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 do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects of which they are knowledgeable.
Are REO's a bargain in Bakersfield?
It's occasionally assumed that any REO must be a good deal and an possibility for easy money. This just isn't 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 soon, 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. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. But there are also many REO's that are not good buys and may lose money.
Time to make an offer?
Most banks have a REO department that you'll work with in buying a REO property from them. Normally 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 regarding the condition of the property and what their process is for getting offers. Since banks typically 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 unknown 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. After you've presented your offer, you can expect the bank to make a counter offer. Then it will be your choice whether to accept their counter, or make another counter offer. Realize, you'll be contending with a process that generally involves several 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.