About Buying Bank-owned Properties...
There's a lot of interest in buying bank-owned properties these days. A lot of information - some good and some bad - is floating around about the subject. Often the information offered is for sale, with the promise that you can make a lot of money with little effort once you know "the secret formula." The fact is that there are no secrets, and to make money does require effort.
So, What is an REO?
REO stands for "Real Estate Owned". These are properties that have gone through foreclosure, were not sold at auction, and are now owned by the bank or mortgage company. REOs typically get listed with a real estate agent who specializes in the selling and marketing of REO Property. The property is marketed via traditional methods and the sale is similar to buying any other house you see on the market with a few differences:
Do be aware that REOs are exempt from normal disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are aware of - because they have never occupied the property and have limited knowledge of its condition and history.
Is it a bargain?
It is commonly assumed that any REO must be a bargain and an opportunity for easy money. This simply isn't true. You have to be very careful about buying a REO if your intent is to make money off of it. While it is true that the bank is typically anxious to sell it quickly, they are also strongly motivated 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 buying foreclosures. But there are also many REOs that are not good buys if your intention is to turn a profit as opposed to occupying the property.
Ready to make an offer?
Typically, banks use a listing agent to get their REO properties listed on the local MLS. Before making your offer, contact the listing agent and find out as much as you can about what they know about the condition of the property and what their process is for receiving offers. Since banks almost always sell REO properties as is, you want to be sure and include an inspection contingency in your offer that gives you time to check for hidden damage and terminate the offer if you find it. As with making any offer on real estate, your offer is more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. In fact, most banks these day make it a requirement.
After you've made your offer, you can expect the bank to make a counter offer if you are not at full price. It will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Realize, you are dealing with a process that probably involves multiple people at the bank, and they don't work evenings or weekends. It is not unusual for the process of offers and counter offers to take days or even a full week.
Please know that I will be here to guide you through this process! I am passionate about my job, love my neighborhood and keep up with the latest trends and strategies so that I can pass them on to my clients.
Your satisfaction is my success!