Looking for a foreclosure or REO property in ?
What's an REO?
REO's or Real Estate Owned are homes which have completed the foreclosure process and are now held by the bank or mortgage company. This is different than 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 accumulated during the foreclosure process. You must also be ready to pay with cash in hand. To top everything off, you'll receive the property totally as is. That possibly may comprise existing liens and even current residents that may require removal.
A REO, on the contrary, is a much cleaner and attractive transaction. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The bank will handle the elimination of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing. Take notice that REOs may be exempt from standard disclosure requirements. For example, in California, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to reveal any defects they are knowledgeable of.
Are REO's a bargain in Colorado Springs?
It is occasionally assumed that any REO must be a bargain and an opportunity for easy money. This just isn't true. You have to be cautious about buying a REO if your intent is make money. While it's true that the bank is usually anxious to sell it promptly, 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. The bargains with money making potential exist, and many people do very well flipping foreclosures. Still there are also many REO's that are not good buys and may lose money.
All set to make an offer?
Most banks have a REO department that you'll work with when 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 about the condition of the property and what their process is for taking 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 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. Once you've submitted 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 offer a counter to the counter offer. Understand, you'll be dealing with a process that generally involves several 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.