Buying REO property or a foreclosure?
Just as with any home purchase, your smartest move is to hire a professional real estate agent.
For more information, simply contact
us through our site or e-mail
us. We are happy to answer questions you have regarding real estate foreclosures.
What's an REO?
"REO" or Real Estate Owned are houses which have been foreclosed upon that the bank or mortgage company presently owns. 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 accrued during the foreclosure process. You must also be ready to pay with cash in hand. Finally, you'll get the property completely as is. That may consist of existing liens and even current tenants that need to be put out.
A bank-owned property, conversely, is a much cleaner and attractive deal. The REO property didn't find a buyer during foreclosure auction. The lender 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.
Note that REOs may be exempt from typical disclosure requirements.
In California, for example, banks are exempt from giving a Transfer Disclosure Statement,
a document that normally requires sellers to reveal any defects they are informed of.
By hiring Mersaes Real Estate, you can rest assured knowing all parties are fulfilling Texas state disclosure requirements.
Is REO property a bargain?
It's commonly assumed that any REO must be a bargain and a chance for easy money. This frequently isn't true. You have to be very careful about buying a repossession if your intent is to profit from the sale. While it's true that the bank is often anxious to sell it quickly, they are also looking to minimize any losses.
When pondering 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.
The bargains with money making potential exist, 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.
Ready to make an offer?
Most banks have a department dedicated to REO that you'll work with in buying REO property from them. To get their properties advertised on the local MLS, the lender will typically hire a listing agent.
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 hidden damage and withdraw the offer if you find it.
As with making any offer on real estate, providing documentation proving your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender.
After you've submitted 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 submit another counter offer.
Your transaction might be settled 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.