Looking for a foreclosure or REO property in ?

What's an REO?

REO stands for Real Estate Owned. These are homes that have completed the foreclosure process which the bank or mortage company now possesses. This is different than 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. You must also be ready to pay with cash in hand. Finally, you'll get the property entirely as is. That possibly will comprise existing liens and even current occupants that need to be expelled.

A REO, by contrast, is a much neater 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 removal of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing. Note that REOs may be exempt from standard disclosure requirements. For example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that typically requires sellers to reveal any defects of which they are aware.

Are REO's a bargain in Bakersfield?

It's occasionally presume that any REO must be a good buy and an chance for easy money. This simply isn't true. You have to be prudent about buying a REO if your intent is make money. While it's true that the bank is typically anxious to sell it fast, they are also strongly interested to get as much as they can for it. When pondering 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. It is possible to find REOs with money-making potential, 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.

Ready to make an offer?

Most mortgage companies have a REO department that you'll work with in buying a REO property from them. Usually 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 about the condition of the property and what their process is for accepting 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 hidden damage and retract 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. At this point it will be your choice whether to accept their counter, or make another counter offer. Understand, you'll be working with a process that usually involves a group of 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.