Buying a REO or foreclosure in Cary

What is an REO?

REO stands for Real Estate Owned. These are properties which have been foreclosed upon which the bank or mortage company now 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 accumulated during the foreclosure process. The buyer must also be able to pay with cash in hand. And on top of all that, you'll get the property entirely as is. That may include prevailing liens and even current occupants that need to be evicted.

A REO, on the other hand, is a much cleaner and attractive proposition. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The lender will deal with 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 standard disclosure requirements. In California, for example, 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.

Is an REO in Cary a bargain?

It is sometimes assumed that any REO must be a steal and an possibility for easy money. This just isn't true. You have to be very careful about buying a REO if your intent is to make money off of it. While it's true that the bank is typically anxious to sell it promptly, they are also strongly motivated to get as much as they can for it. When contemplating 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 buying and selling foreclosures. Still there are also many REO's that are not good buys and not likely to turn a profit.

Ready to make an offer?

Most lenders have a REO department that you'll work with while 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. 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 what they know concerning the condition of the property and what their process is for accepting 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 hidden damage and cancel the offer if you find it.

As with making any offer on real estate, providing documentation of your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender. Once you've made your offer, you can expect the bank to make a counter offer. Then it will be up to you to decide whether to accept their counter, or make another counter offer. Understand, you'll be contending with a process that most likely 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.