Buying a REO or foreclosure in Texoma
What's an REO?
REO's or Real Estate Owned are properties that have gone through foreclosure and are now possessed by the bank or mortgage company. This differs from a property 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. Finally, you'll accept the property one-hundred percent as is. That may comprise existing liens and even current residents that need to be put out.
A REO, on the other hand, is a much neater and attractive deal. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank will see to 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. You should be aware 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 typically requires sellers to reveal any defects they are informed of.
Is an REO in Texoma a bargain?
It's commonly believed that any REO must be a good deal and an opportunity for easy money. This simply isn't true. You have to be very careful about buying a REO if your intent is profit from the sell. While it's true that the bank is often 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. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. However there are also many REO's that are not good buys and may lose money.
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 discover 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 hidden damage and terminate 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 made your offer, you can expect the bank to counter offer. From there it will be your choice whether to accept their counter, or make another counter offer. Understand, you'll be contending 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.