Making an offer on REO property or a foreclosure Home?
Savvy consumers will turn to a seasoned pro when considering a foreclosed property. For more information, just contact us through our site or e-mail us. We’re happy to address any questions you have about real estate foreclosures.
What’s an REO?
“REO” means Real Estate Owned. These are properties which have been foreclosed upon and are currently held by the bank or mortgage company. This is not the same as a property 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 accumulated during the foreclosure process. The buyer must also be able to pay with cash in hand. Finally, you’ll accept the property completely as is. That possibly may include standing liens and even current residents that need to be removed.
A bank-owned property, on the contrary, is a much neater and attractive deal. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The lender will see to the elimination of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing.
Take notice that REOs may be exempt from normal disclosure requirements. For example, in Texas, it is optional for foreclosures to have a Property Disclosure Statement, a document that usually requires sellers to make known any defects they are aware of. By hiring Dash Realty, you can rest assured knowing all parties are fulfilling Texas state disclosure requirements.
Am I assured a bargain when buying an REO property in Texas?
It’s frequently thought that any foreclosure must be a bargain and an opportunity for guaranteed profit. This isn’t always the case. You have to be cautious about buying a REO if your intent is to make money off of it. Even though the bank is usually anxious to offload it soon, they are also motivated to get as much as they can for it.
When considering what to pay for 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. The bargains with money making potential exist, and many people do very well buying foreclosures. However, there are also many REOs that are not good buys and not likely to turn a profit.
Ready to make an offer?
Most mortgage companies have staff dedicated to REO that you’ll work with while buying REO property from them. Typically 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 find out as much as you can about their knowledge regarding the condition of the property and what their process is for taking offers. Since banks almost always 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 unknown damage and terminate 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 decision whether to accept their counter, or submit another counter offer. Be aware, you’ll be dealing with a process that usually involves several 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.