Looking for a foreclosure or REO property in ?
What's an REO?
REO's or Real Estate Owned are houses which have been foreclosed upon and are now possessed by the bank or mortgage company. This is not the same as 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 accumulated during the foreclosure process. The buyer must also be ready to pay with cash in hand. Finally, you'll get the property completely as is. That may include prevailing liens and even current occupants that need to be thrown out.
A REO, on the contrary, is a much neater and attractive proposition. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The bank will deal with 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. Do be aware that REOs may be exempt from typical disclosure requirements. For example, in California, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to make known any defects of which they are informed.
Are REO's a bargain in Austin?
It's occasionally though that any REO must be a steal and an opportunity for easy money. This isn't necessarily true. You have to be cautious about buying a REO if your intent is make a profit. 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 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.
Prepared to make an offer?
Most lenders have a REO department that you'll work with in 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. Prior to 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", it's often prudent to include an inspection contingency in your offer that gives you time to check for hidden 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. After you've presented your offer, you can expect the bank to make a counter offer. From there 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 quite common for the process of offers and counter offers to take days or even weeks.