What's an REO?
"REO" or Real Estate Owned properties are homes which have gone through foreclosure and are currently held by the bank or mortgage company. This is different than 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. Finally, you'll get the property entirely as is. That possibly will comprise of existing liens and even current residents that may require removal.
A bank-owned property, on the contrary, is a much cleaner and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The bank will see to the elimination of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing.
Take notice 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 they are aware of. By hiring Greater Orlando Realty USA, Inc, you can rest assured knowing all parties are fulfilling Florida state disclosure requirements.
Am I assured a low price when investing in a bank owned property?
It is sometimes thought that any foreclosure must be a good deal and an opportunity for easy money. This isn't always true. You have to be prudent about buying a REO if your intent is to make money. Even though the bank is usually anxious to sell it soon, they are also looking to get as much as they can for it.
Look closely at the listing and sales prices of competing properties in the neighborhood when considering the purchase of an REO. And factor in any repairs or remodeling necessary to prepare the house for resale or moving in. There are bargains with potential to make money, and many people do very well buying foreclosures. But, there are also many REOs that are not good buys and not likely to turn a profit.
Prepared to make an offer?
Most banks have staff 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 often 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 taking 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 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 presented your offer, it's customary for the bank to counter offer. At this point it will be your decision whether to accept their counter, or make another counter offer. Your deal could be settled in one day, but that's usually not the case. Since offers and counter offers usually allow a day or more for the other party to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer.