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Purchasing REO property or a foreclosure?
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Savvy consumers will turn to a seasoned pro when considering a foreclosed property. For more information, simply contact me through my site or e-mail me. I'm happy to answer questions you have about real estate foreclosures. |
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What's an REO?"REO" is an abbreviation for Real Estate Owned. These are homes which have completed the foreclosure process that the bank or mortgage company now possesses. This differs from 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 willing to pay with cash in hand. To top everything off, you'll get the property 100% as is. That could involve current liens and even current residents that may require eviction.
A bank-owned property, on the contrary, is a much neater and attractive transaction. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will handle 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 typical disclosure requirements. For instance, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to reveal any defects of which they are knowledgeable. By hiring RE/MAX Main Line, you can rest assured knowing all parties are fulfilling Pennsylvania state disclosure requirements.
Are REO properties a bargain?It's occasionally assumed that any REO must be a steal and an opportunity for guaranteed profit. This often isn't true. You have to be cautious about buying a repossession if your intent is make money. While it's true that the bank is often eager to offload it promptly, they are also looking to minimize any losses.
 When pondering the value of a foreclosure, 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 buying foreclosures. But there are also many REOs that are not good buys and may lose money.
All set to make an offer?Most banks have a department dedicated to REO that you'll work with when buying REO property from them. Commonly 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 discover as much as you can about their knowledge regarding the condition of the property and what their process is for receiving offers. Since banks almost always sell REO properties "as is", you may want to include an inspection contingency in your offer that gives you time to check for unseen damage and retract the offer if you find it. As with making any offer on real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender.
Once you've submitted your offer, you can expect the bank to make a counter offer. At this point it will be your decision whether to accept their counter, or make another counter offer. Your deal could be final in one day, but that's usually not the case. Since offers and counter offers usually give the other party a day or longer to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer. RE/MAX Main Line is accustomed to these situations and will work to ensure there are no unnecessary delays.
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