Smart consumers will turn to a seasoned pro when considering the purchase of a foreclosed property.
What's an REO?
"REO" means Real Estate Owned. These are properties which have completed the foreclosure process that the bank or mortgage company presently owns. This is not the same as 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 added during the foreclosure process. The buyer must also be able to pay with cash in hand. Finally, you'll accept the property totally as is. That possibly may consist of existing liens and even current occupants that need to be removed.
A bank-owned property, by contrast, is a much cleaner and attractive deal. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The bank will see to 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.
Do be aware that REOs may be exempt from normal disclosure requirements. For example, in California, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects of which they are knowledgeable. By hiring MKB Realtors, you can rest assured knowing all parties are fulfilling Virginia state disclosure requirements.
Am I assured a good deal when purchasing an REO property in Roanoke?
It is sometimes assumed that any REO must be a good deal and a possibility for easy money. This isn't always true. You have to be very careful about buying a repossession if your intent is profit from the sale. Even though the bank is typically anxious to sell it soon, they are also looking to get as much as they can for it.
When pondering what to pay for REO property, 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. However there are also many REOs that are not good buys and may not be money makers.
Prepared to make an offer?
Most lenders have staff dedicated to REO that you'll work with in buying REO property from them. To get their properties advertised on the local MLS, the lender will usually hire a listing agent.
Prior to 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 concerning the condition of the property and what their process is for getting offers. Since banks almost always 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 hidden damage and cancel the offer if you find it. If, as a buyer, you can provide documentation showing your ability to secure financing, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This goes for any type of real estate offer.)
After you've made your offer, it's customary for the bank to make a counter offer. At this point it will be up to you to decide whether to accept their counter, or submit another counter offer. Your transaction might be settled in a single day, but that's usually not the case. 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 longer.
When pondering what to pay for REO property, 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. However there are also many REOs that are not good buys and may not be money makers.
