"REO" is an abbreviation for Real Estate Owned. These are properties which have gone through foreclosure and are currently owned by the bank or mortgage company. This is different than buying real estate at a foreclosure auction. 
When buying a property via a foreclosure sale (auction), you generally must pay at least the loan balance plus any interest and other fees accrued during the foreclosure process. You must also be willing to pay with cash in hand. To top everything off, you'll receive the property entirely as is. That possibly could consist of Title Issues like current liens and even current occupants that may require a lawsuit for eviction.
A bank-owned property, by contrast, is a much cleaner and attractive option. The REO property was unable to find a buyer during foreclosure auction. Now the bank owns it, but does NOT want it!. The bank will handle the removal of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing.
Take notice that REOs tend to exempt themselves from typical disclosure requirements. They typically say that "Seller has never resided in subject property", so they disavow themselves of disclosing anything!
Am I guaranteed a good deal when buying an REO property?
It is sometimes believed that any foreclosure must be a steal and an opportunity for easy money. This isn't necessarily true. You have to be very careful about buying a repossession. Even though the bank is often anxious to sell it soon, they are also looking to minimize any losses.
When considering what to pay for REO property, let Don Taylor help you to carefully analyze (and "interpret") recent comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed. There are bargains with potential to make money, and many people do very well flipping foreclosures. But there are also many REOs that are not good buys and not likely to turn a profit.
All set to make an offer?
Most lenders have staff dedicated to selling their REO properties ("Asset Managers"). To get their properties advertised on the local MLS, the lender will engage a listing agent. These REO-Agents are often just too busy to return BUYERS calls. Many literally have no interest in showing property to BUYERS like you and they focus exclusively on obtaining more listings! Don't be surprised if they don't return your call...just CALL DON TAYLOR, instead!
Prior to making your offer, you'll want to contact Don Taylor who wll do his best to discover as much as possible about the condition of the property and what the Lenders process is for getting offers. There will be an inordinate amount of paperwork involved. The Lenders contracts appear onerous, the way they are worded in favor of the Banks.
Since banks typically sell REO properties "as is with the right to inspect", it certainly is in your best interest to include an inspection contingency in your offer that gives you time to check for unknown damage and provide you the right to cancel/terminate your offer if you find more repairs required than you bargained for.
When an offer is presented, you will be required to provide documentation demonstrating your ability to pay, such as recent a pre-approval letter on a lender's letterhead, or a "Proof of Funds" Letter from whomever it is that is holding your funds, for all cash offers.
Once you've made your offer, it's customary for the bank to make a counter offer. Having said that, "Days on the Market" is a crucial statistic to be aware of here. Lenders are somewhat "married" to the list price intially. It is seldom the case that they are "real" negotiable when a listing just comes on the market. You MIGHT get a 5-7% reduction when a listing is "new", but don't count on a lot more...Be aware of recent "comparable sales" before making an offer. That is another free service Don Taylor will provide you.
Lender's agents often list these REO Properties "too low" and hope to get a bidding war going. List price is NOT always indicative of Market Value. Don't miss a good deal by being un-informed.
After your offer is presented it will be up to you to decide whether to accept their counter, or offer a "counter" to their counter-offer. Your transaction might be final in a single day, but that's rare. Offers and counter offers often take a day or more for the other party to respond to (and employees at a bank typically don't work nights or weekends), so you could be looking at a week or longer.
Don Taylor, P.A. / Realty Executives is accustomed to these situations and will work to ensure there are no unnecessary delays and that your offer receives the consideration it deserves.
For a free, no-obligation consultation, please e-mail or Call Don Taylor TODAY!
