Looking for a foreclosure or REO property in ?

What is an REO?

REO's or Real Estate Owned are properties that have completed the foreclosure process 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 added during the foreclosure process. The buyer must also be prepared to pay with cash in hand. Finally, you'll get the property totally as is. That may consist of standing liens and even current tenants that need to be expelled.

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 lender now owns it. The lender will handle 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. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to make known any defects they are knowledgeable of.

Are REO's a bargain in Spicewood?

It is frequently assumed that any REO must be a steal and an chance for easy money. This just isn't true. You have to be prudent about buying a REO if your intent is profit from the sell. While it's true that the bank is often anxious to sell it promptly, they are also strongly encouraged 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 may not be money makers.

Prepared to make an offer?

Most banks have a REO department that you'll work with in buying a REO property from them. Commonly 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 concerning the condition of the property and what their process is for accepting offers. Since banks almost always sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unknown damage and terminate 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. After you've made your offer, you can expect the bank to make a counter offer. At this point it will be your decision whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be contending with a process that probably involves multiple people at the bank, and they don't work evenings or weekends. It's typical for the process of offers and counter offers to take days or even weeks.