Looking for a foreclosure or REO property in ?
What's an REO?
REO is Real Estate Owned. These are properties which have been through foreclosure which the bank or mortage company currently possesses. 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 amassed during the foreclosure process. You must also be willing to pay with cash in hand. And on top of all that, you'll get the property totally as is. That may include existing liens and even current occupants that may require eviction.
A REO, conversely, is a much cleaner and attractive transaction. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The bank will attend to the removal of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing. Do 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 usually requires sellers to tell you about any defects they are knowledgeable of.
Are REO's a bargain in Minneapolis?
It is frequently assumed that any REO must be a good deal and an chance for easy money. This isn't necessarily true. You have to be cautious 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 soon, they are also strongly motivated to get as much as they can for it. When contemplating 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. There are bargains with potential to make money, and many people do very well buying 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 mortgage companies have a REO department that you'll work with in 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. 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 regarding the condition of the property and what their process is for getting offers. Since banks most commonly sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unknown 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. Once you've made your offer, you can expect the bank to respond with a counter offer. At this point it will be your decision whether to accept their counter, or make another counter offer. Understand, you'll be working with a process that generally involves a group of people at the bank, and they don't work evenings or weekends. It's typical for the process of offers and counter offers to take days or even weeks.