Looking for a foreclosure or REO property in ?

What's an REO?

REO is Real Estate Owned. These are properties that have gone through foreclosure which the bank or mortage company currently possesses. This differs from 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 accumulated during the foreclosure process. The buyer must also be prepared to pay with cash in hand. Finally, you'll accept the property one-hundred percent as is. That could comprise prevailing liens and even current residents that need to be kicked out.

A REO, on the other hand, is a much cleaner and attractive deal. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The bank will take care of the elimination of tax liens, evict occupants if needed and generally plan 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 are not required to give a Transfer Disclosure Statement, a document that usually requires sellers to tell you about any defects they are informed of.

Is an REO in Colorado Springs a bargain?

It is occasionally believed that any REO must be a steal and an opportunity 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 quickly, they are also strongly interested to get as much as they can for it. When contemplating 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 flipping foreclosures. Still there are also many REO's that are not good buys and may not be money makers.

Prepared to make an offer?

Most banks 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 find out as much as you can about what they know about the condition of the property and what their process is for accepting offers. Since banks most commonly sell REO properties "as is", you may want 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, 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. Once you've made your offer, you can expect the bank to make a counter offer. At this point it will be your decision whether to accept their counter, or offer a counter to the counter offer. Be aware, 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 typical for the process of offers and counter offers to take days or even weeks.