Buying a REO or foreclosure in Colorado Springs

What's an REO?

REO stands for Real Estate Owned. These are properties which have been through foreclosure and are currently possessed by the bank or mortgage company. This is unlike 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. You must also be ready to pay with cash in hand. And on top of all that, you'll get the property totally as is. That might comprise existing liens and even current residents that need to be expelled.

A REO, on the contrary, is a much cleaner and attractive transaction. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The lender 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 typical disclosure requirements. For instance, in Calfornia, banks are exempt from giving a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects they are aware of.

Is an REO in Colorado Springs a bargain?

It is occasionally believed that any REO must be a good buy and an chance for easy money. This isn't necessarily true. You have to be very careful about buying a REO if your intent is make a profit. While it's true that the bank is often anxious to sell it soon, they are also strongly encouraged to get as much as they can for it. When considering 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. The bargains with money making potential exist, and many people do very well buying foreclosures. But there are also many REO's that are not good buys and may lose money.

Ready to make an offer?

Most mortgage companies have a REO department that you'll work with when buying a REO property from them. Commonly 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 discover as much as you can about what they know about the condition of the property and what their process is for taking 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 hidden damage and retract the offer if you find it.

As with making any offer on real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. After you've made your offer, you can expect the bank to counter offer. From there it will be your decision whether to accept their counter, or offer a counter to the counter offer. Realize, you'll be contending with a process that generally 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.

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