Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are properties that have been foreclosed upon which the bank or mortage company currently owns. This is not the same as 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 able to pay with cash in hand. To top everything off, you'll get the property totally as is. That possibly may consist of existing liens and even current occupants that need to be thrown out.
A REO, on the other hand, is a much cleaner and attractive option. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The lender will see to 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 typical disclosure requirements. In California, for example, banks are not required to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to make known any defects of which they are informed.
Are REO's a bargain in Ocala?
It's commonly though that any REO must be a good deal and an opportunity for easy money. This isn't always 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 motivated to get as much as they can for it. When contemplating 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. Still there are also many REO's that are not good buys and not likely to turn a profit.
Prepared to make an offer?
Most banks have a REO department that you'll work with when 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. Before making your offer, you'll want to contact either the listing agent or REO department at the bank and find out as much as you can about what they know concerning the condition of the property and what their process is for taking offers. Since banks typically sell REO properties "as is", it's often prudent to 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, 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. After you've made your offer, you can expect the bank to counter offer. From there it will be your choice whether to accept their counter, or submit another counter offer. Be aware, 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 typical for the process of offers and counter offers to take days or even weeks.