"REO" is short for Real Estate Owned. These are homes which have been through the foreclosure process and they are now owned by the bank.
A bank-owned property can be an attractive deal. The bank will see 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.
Do be aware that REOs may be exempt from typical disclosure requirements. In California, for example, banks are not required to give a Transfer Disclosure Statement, a document that usually requires sellers to reveal any defects they are aware of. By hiring Bloch & Hoskins Real Estate, you can rest assured knowing all parties are fulfilling California state disclosure requirements.
Am I guaranteed a low price when buying an REO property?It's sometimes assumed that any foreclosure must be a good deal and an opportunity for guaranteed profit. This isn't always 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 typically eager to offload it fast, they are also motivated to get as much as they can for it.
Look closely at the listing and sales prices of competing homes in the neighborhood when considering the purchase of an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in. It is possible to find REOs with money-making potential, and many people do very well buying foreclosures. But there are also many REOs that are not good buys and may lose money.
Prepared to make an offer?
Before making your offer, it's important to prepare so your offer will be reviewed and considered favorably. If you're planning to pay cash for the property, you'll need to supply "proof of funds" showing where the money is being held. If you're going to finance the purchase, it's imperative that you have a loan approval from a "direct lender." Sellers want to make sure that you're a serious and qualified buyer and generally will not even review an offer which doesn't have the necessary financial qualification paperwork.
Since banks sell REO properties "as is", it is in your best interest to include an inspection contingency in your offer that gives you time to check for unknown damage. If there are additional issues discovered during an inspection, you can then generally renegotiate with the bank, or cancel the agreement without penalty.
Once you've submitted your offer, you can expect the bank to make a counter offer. Then it will be your choice whether to accept their counter, or make another counter offer. Since offers and counter offers usually give the other party a day or longer to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or more. Bloch & Hoskins Real Estate is are used to working around the schedules of this type of seller and will do everything possible to ensure there are no unnecessary delays.