Looking for a foreclosure or REO property in ?
What's an REO?
REO's or Real Estate Owned are properties that have completed the foreclosure process and are now possessed 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 accrued during the foreclosure process. You must also be ready to pay with cash in hand. To top everything off, you'll get the property entirely as is. That may consist of standing liens and even current tenants that need to be thrown out.
A REO, conversely, is a much neater and attractive deal. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The bank will deal with the elimination of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Take notice that REOs may be exempt from standard disclosure requirements. For example, in California, banks do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are knowledgeable of.
Are REO's a bargain in Danville?
It is commonly believed that any REO must be a good buy and an chance for easy money. This isn't always 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 often anxious to sell it quickly, they are also strongly encouraged to get as much as they can for it. When considering 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. The bargains with money making potential exist, and many people do very well flipping foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.
Prepared to make an offer?
Most lenders have a REO department that you'll work with while buying a REO property from them. Usually 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 getting offers. Since banks usually 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 unseen damage and retract 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 submitted your offer, you can expect the bank to counter offer. Then it will be your decision whether to accept their counter, or make another counter offer. Be aware, you'll be contending with a process that probably involves several people at the bank, and they don't work evenings or weekends. It's quite common for the process of offers and counter offers to take days or even weeks.