Foreclosed upon and bank owned property purchases require the assistance of an experience professional.
What is an REO?
"REO" stands for Real Estate Owned. These are properties which have been foreclosed upon that the bank or mortgage company currently possesses. This is not the same as 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 willing to pay with cash in hand. Finally, you'll get the property 100% as is. That possibly could consist of standing liens and even current tenants that need to be put out.
A bank-owned property, conversely, is a more tidy and attractive option. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The bank will take care of 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.
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 ordinarily requires sellers to disclose any defects they are informed of. By hiring Coldwell Banker Pro IV, you can rest assured knowing all parties are fulfilling Minnesota state disclosure requirements.
Am I guaranteed a low price when investing in an REO property?
It's sometimes presumed that any foreclosure must be a good deal and a possibility for easy money. This isn't always the case. You have to be very careful about buying a repossession if your intent is profit from the sale. While it's true that the bank is typically eager to sell it quickly, they are also motivated to minimize any losses.
When pondering the value of a foreclosure, carefully analyze 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. But there are also many REOs that are not good buys and not likely to turn a profit.
Time to make an offer?
Most mortgage companies have staff dedicated to REO that you'll work with when buying 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, I can contact the listing agent and discover as much as I can about their knowledge concerning the condition of the property and what their process is for accepting offers. Since banks most commonly sell REO properties "as is", you may want to include an inspection contingency in your offer that gives you time to check for unseen damage and withdraw the offer if you find it. If, as a buyer, you can provide documentation demonstrating your ability to secure financing, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This is generally true for any type of real estate offer.)
After you've made your offer, it's customary for the bank to counter offer. From there it will be your choice whether to accept their counter, or submit another counter offer. Be aware, you'll be working with a process that most likely involves multiple people at the bank, and they don't work evenings or weekends. It's not unusual for the process of offers and counter offers to take days.
Coldwell Banker Pro IV 1220 4th St W Rush City, MN 55069
When pondering the value of a foreclosure, carefully analyze 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. But there are also many REOs that are not good buys and not likely to turn a profit.
