What is an REO?
“REO” or Real Estate Owned are properties which have been foreclosed upon and are currently owned by the bank or mortgage company. This differs from real estate up for foreclosure auction.
When buying a property during a foreclosure sale, you typically 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 receive the property entirely as is. That possibly may consist of current liens and even current denizens that may require eviction.
A bank-owned property, conversely, is a more clean and attractive deal. In this case, the REO property didn’t sell during the foreclosure auction. Now the bank owns it. The lender will deal with the elimination of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing.
Take notice that REOs may be exempt from typical disclosure requirements. By hiring Direct Buy Realty, you can rest assured knowing all parties are fulfilling Florida state disclosure requirements.
Is REO property in Tampa Bay a bargain?
It is frequently presumed that any foreclosure must be a bargain and a possibility for easy money. This frequently isn’t true. You have to be cautious about buying a REO if your intent is to make money off of it. Even though the bank is usually anxious to sell it promptly, they are also looking to get as much as they can for it.
When contemplating the value of REO property, 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. There are bargains with potential to make money, and many people do very well buying foreclosures. However, there are also many REOs that are not good buys and may not be money makers.
Time to make an offer?
Most lenders have a department dedicated to REO that you’ll work with while buying REO property from them. To get their properties advertised on the local MLS, the lender will frequently use a listing agent.
Before 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 concerning the condition of the property and what their process is for accepting offers. Since banks most commonly 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 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 submitted your offer, the bank may respond with a counter offer. At this point it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Your deal might be settled in a single 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.