Looking for a foreclosure or REO property in ?

What is an REO?

REO's or Real Estate Owned are homes that have completed the foreclosure process which the bank or mortage company presently holds. 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 amassed during the foreclosure process. The buyer must also be willing to pay with cash in hand. To top everything off, you'll accept the property completely as is. That possibly will include prevailing liens and even current occupants that may require expulsion.

A REO, conversely, is a much neater and attractive deal. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The bank will attend to the elimination of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Note that REOs may be exempt from normal disclosure requirements. For example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to make known any defects they are aware of.

Is an REO in Colorado Springs a bargain?

It's commonly assumed that any REO must be a good buy and an possibility for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is make a profit. While it's true that the bank is often anxious to sell it fast, 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. The bargains with money making potential exist, and many people do very well buying and selling 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 mortgage companies 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 learn as much as you can about what they know about the condition of the property and what their process is for receiving offers. Since banks almost always sell REO properties "as is", you'll want to be sure and 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, 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 presented your offer, you can expect the bank to make a counter offer. Then it will be your decision whether to accept their counter, or submit another counter offer. Be aware, you'll be dealing with a process that usually 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.