Buying a foreclosure or REO property in
What's an REO?
REO's or Real Estate Owned are houses which have completed the foreclosure process which the bank or mortage company currently owns. This is unlike a property 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 accrued during the foreclosure process. The buyer must also be able to pay with cash in hand. To top everything off, you'll receive the property totally as is. That possibly could include current liens and even current denizens that may require eviction.
A REO, conversely, is a more tidy and attractive option. The REO property was unable to find a buyer during foreclosure auction. The bank now owns it. The bank will attend to the elimination of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing. Take notice that REOs may be exempt from typical disclosure requirements. For instance, in Calfornia, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to make known any defects they are knowledgeable of.
Are REO's a bargain in Tulsa?
It is frequently assumed that any REO must be a good buy and an opportunity for easy money. This isn't always 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 soon, they are also strongly interested 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. But there are also many REO's that are not good buys and may not be money makers.
Prepared to make an offer?
Most lenders have a REO department that you'll work with in buying a REO property from them. Commonly 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 about the condition of the property and what their process is for taking offers. Since banks most commonly sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for hidden damage and cancel 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. After you've presented your offer, you can expect the bank to counter offer. At this point it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Realize, you'll be working with a process that most likely involves multiple 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.