Looking for a foreclosure or REO property in ?
What's an REO?
REO stands for Real Estate Owned. These are properties that have been foreclosed upon and are presently held by the bank or mortgage company. This is different than real estate 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. The buyer must also be willing to pay with cash in hand. To top everything off, you'll accept the property entirely as is. That could comprise prevailing liens and even current occupants that need to be kicked out.
A REO, by contrast, is a much cleaner and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. Now the bank owns it. The bank will handle 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. Take notice 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 tell you about any defects of which they are knowledgeable.
Are REO's a bargain in Rancho Palos Verdes?
It's frequently presume that any REO must be a good buy and an chance for easy money. This simply isn't true. You have to be very careful about buying a REO if your intent is make money. While it's true that the bank is often anxious to sell it fast, they are also strongly encouraged 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. There are bargains with potential to make money, and many people do very well flipping foreclosures. But there are also many REO's that are not good buys and may lose money.
Time to make an offer?
Most lenders have a REO department that you'll work with while buying a REO property from them. Typically 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 about the condition of the property and what their process is for receiving 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 unseen 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. Once you've submitted your offer, you can expect the bank to make a counter offer. From there it will be up to you to decide whether to accept their counter, or submit another counter offer. Understand, you'll be working with a process that probably involves several 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.