Buying a REO or foreclosure in Bakersfield
What's an REO?
REO stands for Real Estate Owned. These are properties that have been through foreclosure and are currently possessed 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. You must also be able to pay with cash in hand. And on top of all that, you'll receive the property totally as is. That could comprise current liens and even current denizens that need to be removed.
A REO, conversely, is a more tidy and attractive transaction. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank will take care of the elimination of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Note that REOs may be exempt from normal disclosure requirements. For example, in California, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to make known any defects they are aware of.
Is an REO in Bakersfield a bargain?
It's commonly presume that any REO must be a good buy and an possibility for easy money. This isn't necessarily true. You have to be cautious about buying a REO if your intent is to make money off of it. While it's true that the bank is usually anxious to sell it fast, they are also strongly motivated 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. Still there are also many REO's that are not good buys and may not be money makers.
Time to make an offer?
Most lenders have a REO department that you'll work with when 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 regarding the condition of the property and what their process is for taking 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 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. Once you've made your offer, you can expect the bank to respond with a counter offer. At this point it will be your decision whether to accept their counter, or make another 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.