Buying a REO or foreclosure in Colorado Springs
What's an REO?
REO's or Real Estate Owned are houses which have been through foreclosure which the bank or mortage company currently possesses. This is not the same as a property 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 amassed during the foreclosure process. The buyer must also be ready to pay with cash in hand. To top everything off, you'll accept the property totally as is. That possibly will include existing liens and even current denizens that may require removal.
A REO, by contrast, is a much neater and attractive option. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will attend to the removal of tax liens, evict occupants if needed and generally prepare 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 ordinarily requires sellers to reveal any defects of which they are informed.
Are REO's a bargain in Colorado Springs?
It is sometimes believed that any REO must be a bargain and an chance for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is make money. While it's true that the bank is typically anxious to sell it soon, they are also strongly motivated to get as much as they can for it. When pondering 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. There are bargains with potential to make money, and many people do very well buying foreclosures. Still there are also many REO's that are not good buys and may not be money makers.
Time to make an offer?
Most lenders have a REO department that you'll work with in buying a REO property from them. Typically the REO department will use a listing agent to get their REO properties listed on the local MLS. Before 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 what they know concerning the condition of the property and what their process is for taking offers. Since banks almost always 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 cancel the offer if you find it.
As with making any offer on real estate, your offer may be more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. Once you've presented your offer, you can expect the bank to counter offer. From there it will be your decision whether to accept their counter, or make another counter offer. Understand, you'll be contending with a process that usually involves multiple people at the bank, and they don't work evenings or weekends. It's quite common for the process of offers and counter offers to take days or even weeks.