Looking for a foreclosure or REO property in ?
What's an REO?
REO's or Real Estate Owned are homes that have completed the foreclosure process which the bank or mortage company now holds. This is not the same as real estate 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 amassed during the foreclosure process. The buyer must also be able to pay with cash in hand. And on top of all that, you'll receive the property completely as is. That possibly will comprise standing liens and even current occupants that need to be evicted.
A REO, on the other hand, is a much neater and attractive deal. The REO property was unable to find a buyer during foreclosure auction. Now the bank owns it. The lender will take care of 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 typical disclosure requirements. For example, in California, banks are not required to give a Transfer Disclosure Statement, a document that usually requires sellers to make known any defects they are aware of.
Are REO's a bargain in Austin?
It's occasionally though that any REO must be a good buy and an chance for easy money. This isn't necessarily true. You have to be very careful about buying a REO if your intent is profit from the sell. While it's true that the bank is often anxious to sell it quickly, they are also strongly encouraged to get as much as they can for it. When pondering 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 and selling foreclosures. But there are also many REO's that are not good buys and may lose money.
Prepared to make an offer?
Most lenders 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. Prior to 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 about the condition of the property and what their process is for receiving 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 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. Once you've presented your offer, you can expect the bank to respond with a counter offer. From there it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Be aware, you'll be working with a process that usually involves multiple 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.