Buying a REO or foreclosure in Rancho Palos Verdes

What's an REO?

REO is Real Estate Owned. These are houses that have been foreclosed upon which the bank or mortage company presently possesses. This is unlike real estate 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 willing to pay with cash in hand. To top everything off, you'll receive the property entirely as is. That may include current liens and even current occupants that may require expulsion.

A REO, conversely, is a more tidy and attractive option. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The lender 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. Note that REOs may be exempt from typical disclosure requirements. For example, in California, banks do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to make known any defects of which they are knowledgeable.

Are REO's a bargain in Rancho Palos Verdes?

It is occasionally assumed that any REO must be a bargain and an chance for easy money. This usually isn't true. You have to be prudent about buying a REO if your intent is to make money off of it. While it's true that the bank is often anxious to sell it quickly, they are also strongly motivated 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 and selling foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.

Ready to make an offer?

Most banks have a REO department that you'll work with while 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. Before making your offer, you'll want to contact either the listing agent or REO department at the bank and find out 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 typically 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, 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 presented 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 offer a counter to the counter offer. Be aware, you'll be working with a process that generally 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.