Buying REO property or a foreclosure?
Just as with any property purchase, your smartest move is to hire a professional real estate agent.
SEARCH FOR FORECLOSED OR BANK OWNED HOMES
What's an REO?
"REO" or Real Estate Owned are properties which have completed the foreclosure process and are currently possessed by the bank or mortgage company. This is not the same as a property 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. You must also be ready to pay with cash in hand. And on top of all that, you'll receive the property 100% as is. That may include prevailing liens and even current residents that may require eviction.
A bank-owned property, on the other hand, is a more tidy and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The lender will deal with 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.
You should be aware that REOs may be exempt from standard disclosure requirements.
In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to make known any defects they are knowledgeable of.
By hiring SBR Realty Pros, you can rest assured knowing all parties are fulfilling New Jersey state disclosure requirements.
Am I guaranteed a bargain when purchasing an REO property?
It is sometimes presumed that any foreclosure must be a steal and an opportunity for guaranteed profit. This isn't always true. You have to be very careful about buying a REO if your intent is to make a profit. While it's true that the bank is typically anxious to sell it promptly, they are also looking to get as much as they can for it.
Look carefully at the listing and sales prices of comparable properties in the neighborhood when making an offer on an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in.
It is possible to find REOs with money-making potential, and many people do very well buying foreclosures. However, there are also many REOs that are not good buys and may lose money.
Prepared to make an offer?
Most banks have staff dedicated to REO that you'll work with while buying REO property from them. Typically 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 find out as much as you can about their knowledge regarding the condition of the property and what their process is for getting offers. Since banks typically 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 unknown damage and withdraw the offer if you find it. If, as a buyer, you can provide documentation showing your ability to secure financing, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This is generally true for any type of real estate offer.)
Once you've made your offer, you can expect the bank to respond with a counter offer. From there it will be your choice whether to accept their counter, or offer a counter to the counter offer. Realize, you'll be working with a process that generally involves multiple people at the bank, and they don't work evenings or weekends. It's typical for there to be days or even weeks of going back and forth. SBR Realty Pros is used to working around the schedules of this type of seller and will do everything possible to ensure there are no unnecessary delays.