Looking for a foreclosure or REO property in ?
What's an REO?
REO is short for Real Estate Owned. These are houses which have completed the foreclosure process which the bank or mortage company currently owns. This is different than 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 accrued during the foreclosure process. The buyer must also be willing to pay with cash in hand. Finally, you'll get the property entirely as is. That may comprise prevailing liens and even current denizens that need to be removed.
A REO, conversely, is a much cleaner and attractive option. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The lender will handle 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. Note that REOs may be exempt from typical disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to disclose any defects of which they are aware.
Is an REO in Austin a bargain?
It's commonly though that any REO must be a good buy and an opportunity for easy money. This isn't always true. You have to be cautious about buying a REO if your intent is to make money off of it. While it's true that the bank is often anxious to sell it soon, 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. There are bargains with potential to make money, and many people do very well flipping foreclosures. However 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 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 discover as much as you can about what they know regarding 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 cancel 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 make a counter offer. From there it will be your choice whether to accept their counter, or make another counter offer. Realize, you'll be contending with a process that most likely 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.