Making an offer on REO property or a foreclosure?
|Foreclosed upon and bank owned property purchases require the assistance of an experience professional. If you have any questions regarding real estate in Northern Virginia, call me or send me an e-mail.|
What's an REO?"REO" stands for Real Estate Owned. These are homes which have been foreclosed upon and are now owned by the bank or mortgage company. This is unlike 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 accumulated during the foreclosure process. You must also be prepared to pay with cash in hand. And on top of all that, you'll accept the property completely as is. That may involve existing liens and even current occupants that may require eviction.
A bank-owned property, by contrast, is a more tidy and attractive deal. The REO property didn't find a buyer during foreclosure auction. The lender now owns it. The lender will take care of the elimination of tax liens, evict occupants if needed and generally arrange 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 North Carolina, it is optional for foreclosures to have a Property Disclosure Statement, a document that normally requires sellers to disclose any defects of which they are informed. By hiring Take 2 Real Estate, you can rest assured knowing all parties are fulfilling Virginia state disclosure requirements.
Are REO properties a bargain?It is sometimes assumed that any foreclosure must be a bargain and a chance for easy money. This isn't always the case. You have to be very careful about buying a REO if your intent is profit from the sale. While it's true that the bank is typically eager to sell it fast, they are also motivated to minimize any losses.
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 flipping foreclosures. Still there are also many REOs that are not good buys and may not be money makers.
All set to make an offer?Most mortgage companies have a department dedicated to REO that you'll work with when buying REO property from them. To get their properties advertised on the local MLS, the lender will often hire a listing agent.
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 usually 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 unseen damage and withdraw the offer if you find it. As with making any offer on real estate, providing documentation showing your ability to secure financing may make your offer more attractive, such as a pre-approval letter from a lender.
After you've made your offer, it's customary for the bank to make a counter offer. Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Your transaction could be final in one day, but that's rare. 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. Take 2 Real Estate is accustomed to these situations and will work to ensure there are no undue delays.