Buying a foreclosure or REO property in

What is an REO?

REO is Real Estate Owned. These are properties which have been foreclosed upon which the bank or mortage company currently owns. This differs from 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 accrued during the foreclosure process. The buyer must also be ready to pay with cash in hand. And on top of all that, you'll get the property totally as is. That might consist of standing liens and even current residents that need to be put out.

A REO, by contrast, is a much cleaner and attractive deal. The REO property was unable to find a buyer during foreclosure auction. The bank now 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 standard disclosure requirements. For example, in California, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to make known any defects of which they are informed.

Is an REO in Dunedin a bargain?

It's occasionally presume that any REO must be a bargain and an possibility for easy money. This isn't always true. You have to be prudent about buying a REO if your intent is to make money off of it. While it's true that the bank is typically anxious to sell it soon, they are also strongly encouraged 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. The bargains with money making potential exist, and many people do very well buying foreclosures. However there are also many REO's that are not good buys and not likely to turn a profit.

Ready to make an offer?

Most mortgage companies have a REO department that you'll work with in buying a REO property from them. Usually 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 learn as much as you can about what they know regarding the condition of the property and what their process is for accepting offers. Since banks almost always sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unseen 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 presented your offer, you can expect the bank to counter offer. Then it will be your choice whether to accept their counter, or submit another counter offer. Realize, you'll be contending with a process that usually involves a group of people at the bank, and they don't work evenings or weekends. It's not uncommon for the process of offers and counter offers to take days or even weeks.