Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are properties which have completed the foreclosure process which the bank or mortage company now possesses. This is unlike a property 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 able to pay with cash in hand. Finally, you'll get the property completely as is. That may comprise existing liens and even current denizens that need to be kicked out.
A REO, on the other hand, is a much cleaner and attractive transaction. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will take care of 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 typical disclosure requirements. For instance, in Calfornia, banks are not required to give a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are aware of.
Are REO's a bargain in Cary?
It is sometimes presume that any REO must be a good buy and an chance for easy money. This usually isn't true. You have to be cautious about buying a REO if your intent is profit from the sell. While it's true that the bank is usually anxious to sell it fast, they are also strongly interested to get as much as they can for it. When pondering the value of a REO, 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 flipping foreclosures. Still there are also many REO's that are not good buys and not likely to turn a profit.
All set to make an offer?
Most lenders have a REO department that you'll work with in buying a REO property from them. Normally 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 learn as much as you can about what they know about 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 cancel 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. Once you've submitted your offer, you can expect the bank to make a counter offer. At this point it will be your choice whether to accept their counter, or offer a counter to the counter offer. Be aware, you'll be contending with a process that probably involves a group of people at the bank, and they don't work evenings or weekends. It's not uncommon for the process of offers and counter offers to take days or even weeks.