Buying bank-owned properties
Purchasing bank-owned properties are extremely popular these days. The following information will introduce you to the subject.
What’s an REO?
REO stands for “Real Estate Owned”. These are properties that have gone through foreclosure and are now owned by a bank or mortgage company. This is not the same as a property up for foreclosure auction. When buying a property during a foreclosure sale, you may have to pay for other fees accumulated during the foreclosure process. You must also be prepared to pay with cash in hand. The property is offered and sold 100% “As Is”. That could include existing liens and even current occupants that need to be evicted. A REO, by contrast, is a much “cleaner” and attractive transaction. When an REO property did not find a buyer during foreclosure auction, the bank now owns it. The bank will see to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. REO’s may be exempt from normal disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to advise you about any property defects they are aware of.
Is it a bargain?
It’s commonly presumed that any REO must be a bargain and an opportunity for easy money every time. This is false. One must be very careful about buying a REO if your intent is to profit from it. While it’s true that the bank is typically anxious to sell it quickly, they are also strongly motivated to obtain the highest bidder. When considering the value of a REO, you need to look closely at comparable sales in the neighborhood of the property, and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the property for resale. The bargains with money making potential exist, and many buyers do very well purchasing foreclosures. Yet, there are also many REO’s that are not feasible buys and may not likely to turn a profit. Always consider the pros and cons in this real estate endeavor.
Ready to make an offer?
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*Note: We can also make Pre-foreclosure property information available to you upon request.