Buying a REO or foreclosure in Colorado Springs

What is an REO?

REO means Real Estate Owned. These are houses that have completed the foreclosure process which the bank or mortage company now owns. This differs from 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 accrued during the foreclosure process. You must also be willing to pay with cash in hand. To top everything off, you'll receive the property totally as is. That possibly will include current liens and even current occupants that need to be expelled.

A REO, on the other hand, is a more tidy and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The lender will handle the removal of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing. Do be aware that REOs may be exempt from standard disclosure requirements. For instance, in Calfornia, banks are not required to give a Transfer Disclosure Statement, a document that usually requires sellers to reveal any defects they are aware of.

Are REO's a bargain in Colorado Springs?

It's frequently believed that any REO must be a good buy and an opportunity for easy money. This isn't always true. You have to be very careful about buying a REO if your intent is make money. While it's true that the bank is usually anxious to sell it quickly, 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. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. Still there are also many REO's that are not good buys and may lose money.

Ready to make an offer?

Most lenders have a REO department that you'll work with while 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. Prior to 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 regarding the condition of the property and what their process is for getting offers. Since banks typically sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unseen 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 respond with a counter offer. At this point it will be your decision whether to accept their counter, or submit another counter offer. Realize, you'll be contending with a process that most likely involves a group of 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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