“REO” or Real Estate Owned are houses which have completed the foreclosure process that the bank or mortgage company currently owns. This is different than 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 added during the foreclosure process. You must also be able to pay with cash in hand. To top everything off, you’ll accept the property 100% as is. That could comprise of current liens and even current denizens that need to be evicted.
A bank-owned property, on the contrary, is a more tidy and attractive option. The REO property didn’t find a buyer during foreclosure auction. Now the bank owns it. The bank 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 normal disclosure requirements. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to make known any defects of which they are knowledgeable. By hiring SWFL Realty Group, you can rest assured knowing all parties are fulfilling Florida state disclosure requirements.
It’s sometimes believed that any REO must be a good buy and a chance for guaranteed profit. This simply isn’t true. You have to be prudent about buying a repossession if your intent is to make money off of it. Even though the bank is usually eager to offload it promptly, they are also looking to minimize any losses.
When contemplating 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. There are bargains with potential to make money, and many people do very well flipping foreclosures. However there are also many REOs that are not good buys and not likely to turn a profit.
Most lenders have staff dedicated to REO that you'll work with in buying REO property from them. To get their properties advertised on the local MLS, the lender will usually use a listing agent.
Prior to 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 their knowledge concerning the condition of the property and what their process is for accepting 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 unseen damage and withdraw the offer if you find it. If, as a buyer, you can provide documentation showing your ability to pay, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This holds for any type of real estate offer.)
After you've submitted your offer, you can expect the bank to respond with a counter offer. From there it will be your decision whether to accept their counter, or submit another counter offer. Be aware, you'll be contending with a process that usually involves multiple people at the bank, and they don't work evenings or weekends. It's not unusual for the process of offers and counter offers to take days or even weeks. SWFL Realty Group is accustomed to these situations and will work to ensure there are no unnecessary delays.