Looking for a foreclosure or REO property in ?
What's an REO?
REO is Real Estate Owned. These are properties which have completed the foreclosure process and are currently 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 amassed during the foreclosure process. You must also be able to pay with cash in hand. To top everything off, you'll accept the property totally as is. That might include prevailing liens and even current denizens that may require removal.
A REO, conversely, is a much neater and attractive option. The REO property didn't find a buyer during foreclosure auction. Now the bank owns it. The lender will deal with the removal 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 typical disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to disclose any defects they are informed of.
Are REO's a bargain in Austin?
It is commonly believed that any REO must be a steal and an possibility for easy money. This usually isn't true. You have to be cautious about buying a REO if your intent is make money. 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 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. The bargains with money making potential exist, and many people do very well buying and selling foreclosures. However 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 when 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 find out as much as you can about what they know regarding the condition of the property and what their process is for getting offers. Since banks typically sell REO properties "as is", you'll want to be sure and 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. After you've submitted your offer, you can expect the bank to counter offer. From there it will be your decision whether to accept their counter, or make another counter offer. Understand, 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 quite common for the process of offers and counter offers to take days or even weeks.
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