What’s an REO?
“REO” or Real Estate Owned are homes which have been through foreclosure and are currently possessed by the bank or mortgage company. This is unlike a property 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. The buyer must also be able to pay with cash in hand. To top everything off, you’ll accept the property completely as is. That possibly could consist of existing liens and even current residents that need to be expelled.
A bank-owned property, by contrast, is a more tidy and attractive proposition. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The lender will attend to 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.
You should be aware that REOs may be exempt from standard disclosure requirements. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects of which they are knowledgeable. By hiring Zivkovic & Associates Real Estate Services, LLC, you can rest assured knowing all parties are fulfilling Florida state disclosure requirements.
Are REO properties a bargain in Lee County?
It is occasionally thought that any foreclosure must be a good buy and an opportunity for easy money. This isn’t necessarily true. You have to be prudent about buying a REO if your intent is to make a profit. While it’s true that the bank is often eager to sell it soon, they are also looking to get as much as they can for it.
When considering the value of REO property, 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 foreclosures. However, there are also many REOs that are not good buys and may not be money makers.
Time to make an offer?
Most mortgage companies have staff dedicated to REO that you’ll work with when buying REO property from them. To get their properties advertised on the local MLS, the lender will usually hire a listing agent.
Before making your offer, you’ll want to contact either the listing agent or REO department at the bank and find out as much as you can about what they know about the condition of the property and what their process is for accepting offers. Since banks typically 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 terminate the offer if you find it. As with making any offer on real estate, you’ll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender.
Once you’ve presented your offer, it’s customary for the bank to respond with a counter offer. At this point it will be your decision whether to accept their counter, or offer a counter to the counter offer. Your transaction might be settled in a single day, but that’s rare. Since offers and counter offers usually allow a day or more for the other party to respond (and employees at a bank don’t work nights or weekends) you could be looking at a week or longer. Zivkovic & Associates Real Estate Services, LLC is accustomed to these situations and will work to ensure there are no unnecessary delays.