Buying a REO or foreclosure in Rancho Palos Verdes
What is an REO?
REO's or Real Estate Owned are houses which have completed the foreclosure process and are presently owned by the bank or mortgage company. This differs from 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 added during the foreclosure process. You must also be willing to pay with cash in hand. And on top of all that, you'll get the property entirely as is. That may include prevailing liens and even current tenants that need to be kicked out.
A REO, on the contrary, is a much neater and attractive option. The REO property didn't find a buyer during foreclosure auction. Now the bank owns it. The bank will deal with the elimination of tax liens, evict occupants if needed and generally prepare 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 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 of which they are aware.
Is an REO in Rancho Palos Verdes a bargain?
It's occasionally though that any REO must be a steal and an possibility for easy money. This usually isn't true. You have to be very careful about buying a REO if your intent is to make money off of it. While it's true that the bank is usually anxious to sell it promptly, 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. There are bargains with potential to make money, and many people do very well buying foreclosures. Still there are also many REO's that are not good buys and not likely to turn a profit.
Time to make an offer?
Most lenders have a REO department that you'll work with while 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 discover as much as you can about what they know regarding the condition of the property and what their process is for getting 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 withdraw 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 made your offer, you can expect the bank to respond with a counter offer. At this point it will be your decision whether to accept their counter, or submit another counter offer. Realize, you'll be contending with a process that most likely 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.