Buying a foreclosure or REO property in
What is an REO?
REO's or Real Estate Owned are properties that have been through foreclosure which the bank or mortage company currently owns. This is unlike 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. The buyer must also be ready to pay with cash in hand. To top everything off, you'll get the property completely as is. That could consist of standing liens and even current tenants that need to be put out.
A REO, conversely, is a more tidy and attractive deal. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank will attend to 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. Note that REOs may be exempt from normal disclosure requirements. For instance, in Calfornia, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to tell you about any defects they are informed of.
Is an REO in Lawton a bargain?
It is frequently though that any REO must be a steal and an chance for easy money. This usually isn't true. You have to be prudent about buying a REO if your intent is profit from the sell. 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 considering 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. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. But there are also many REO's that are not good buys and may not be money makers.
Time to make an offer?
Most banks 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. 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 concerning the condition of the property and what their process is for accepting offers. Since banks usually 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 hidden 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 made your offer, you can expect the bank to counter offer. Then 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 generally involves several 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.