Making an offer on REO property or a foreclosure in Colorado Springs?
Making an offer on a bank-owned property is not something to be taken lightly.
If you have any questions regarding real estate in Colorado Springs, Colorado, call me or send me an e-mail.
What is an REO?
"REO" is short for Real Estate Owned. These are houses which have been through foreclosure that the bank or mortgage company now possesses. This is different than a property 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. You must also be ready to pay with cash in hand. To top everything off, you'll receive the property 100% as is. That possibly could comprise of current liens and even current tenants that need to be thrown out.
A bank-owned property, conversely, is a much neater and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The lender will attend 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.
In California, for example, banks are not required to give a Transfer Disclosure Statement,
a document that typically requires sellers to make known any defects they are knowledgeable of.
By hiring Brian L. A. Wess - CRS, CDPE, GRI, ABR, ASR, CSR, CNS, SFR, e-PRO, you can rest assured knowing all parties are fulfilling Colorado state disclosure requirements.
Are REO properties a bargain in El Paso County?
It is frequently presumed that any REO must be a bargain and a possibility for easy money. This isn't necessarily the case. You have to be very careful about buying a REO if your intent is to make money. While it's true that the bank is typically anxious to offload it promptly, they are also motivated to get as much as they can for it.
When contemplating what to pay for REO property, carefully analyze 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.
It is possible to find REOs with money-making potential, 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 banks 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 frequently contract with a listing agent.
Prior to making your offer, you'll want to contact either the listing agent or REO department at the bank and learn as much as you can about their knowledge regarding the condition of the property and what their process is for receiving offers. Since banks usually sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unknown damage and terminate the offer if you find it.
As with making any offer on real estate, providing documentation proving your ability to secure financing may make your offer more attractive, such as a pre-approval letter from a lender.
Once you've made your offer, it's customary for the bank to counter offer. From there it will be your choice whether to accept their counter, or make another counter offer.
Your transaction could be final in one day, but that's rare. 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. Brian L. A. Wess - CRS, CDPE, GRI, ABR, ASR, CSR, CNS, SFR, e-PRO is accustomed to these situations and will work to ensure there are no undue delays.
Brian L. A. Wess - CRS, CDPE, GRI, ABR, ASR, CSR, CNS, SFR, e-PRO Infinite Horizons Realty 2910 N. Powers Blvd, #174 Colorado Springs, CO 80922
When contemplating what to pay for REO property, carefully analyze 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.
It is possible to find REOs with money-making potential, 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.
