Looking for a foreclosure or REO property in ?

What is an REO?

REO means Real Estate Owned. These are properties that have completed the foreclosure process and are presently possessed by the bank or mortgage company. This differs from 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. To top everything off, you'll get the property completely as is. That could consist of current liens and even current occupants that may require removal.

A REO, conversely, is a much cleaner and attractive proposition. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The bank will take care of 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. Take notice that REOs may be exempt from typical disclosure requirements. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects of which they are informed.

Are REO's a bargain in Colorado Springs?

It is sometimes though that any REO must be a bargain and an possibility for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is to make money off of it. While it's true that the bank is usually anxious to sell it fast, they are also strongly encouraged 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. It is possible to find REOs with money-making potential, and many people do very well buying foreclosures. But there are also many REO's that are not good buys and may lose money.

Prepared to make an offer?

Most banks have a REO department that you'll work with when buying a REO property from them. Usually 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 find out 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 typically sell REO properties "as is", you may want to include an inspection contingency in your offer that gives you time to check for hidden damage and withdraw the offer if you find it.

As with making any offer on real estate, providing documentation of your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender. After you've presented your offer, you can expect the bank to make a counter offer. From there it will be your decision whether to accept their counter, or make another counter offer. Realize, you'll be working with a process that generally involves a group of people at the bank, and they don't work evenings or weekends. It's not uncommon for the process of offers and counter offers to take days or even weeks.

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Brian L. A. Wess

Infinite Horizons Realty

2910 N. Powers Blvd, #174
Colorado Springs, CO 80922