Buying a foreclosure or REO property in
What is an REO?
REO's or Real Estate Owned are homes which have been foreclosed upon and are presently held by the 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 must pay at least the loan balance plus any interest and other fees amassed during the foreclosure process. You must also be ready to pay with cash in hand. And on top of all that, you'll accept the property totally as is. That may include standing liens and even current occupants that need to be put out.
A REO, on the other hand, is a more tidy and attractive option. The REO property didn't find a buyer during foreclosure auction. The lender now owns it. The lender will deal with the elimination of tax liens, evict occupants if needed and generally organize 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 ordinarily requires sellers to reveal any defects they are aware of.
Is an REO in Tulsa a bargain?
It's sometimes though that any REO must be a bargain and an possibility for easy money. This simply isn't true. You have to be prudent about buying a REO if your intent is make money. While it's true that the bank is typically anxious to sell it quickly, they are also strongly interested 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. The bargains with money making potential exist, and many people do very well buying and selling foreclosures. Still 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 when 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 discover as much as you can about what they know concerning the condition of the property and what their process is for receiving offers. Since banks almost always sell REO properties "as is", you may want to include an inspection contingency in your offer that gives you time to check for unseen damage and terminate the offer if you find it.
As with making any offer on real estate, your offer may be more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. Once you've made your offer, you can expect the bank to counter offer. From there it will be up to you to decide whether to accept their counter, or make another counter offer. Be aware, you'll be contending with a process that most likely involves a group of 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.