Buying a REO or foreclosure in Austin
What is an REO?
REO is Real Estate Owned. These are properties which have completed the foreclosure process and are currently owned by the bank or mortgage company. This is unlike 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 willing to pay with cash in hand. Finally, you'll receive the property one-hundred percent as is. That possibly may consist of existing liens and even current denizens that may require removal.
A REO, on the other hand, is a much cleaner and attractive deal. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The bank will take care of the elimination of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing. Take notice that REOs may be exempt from standard disclosure requirements. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to make known any defects they are knowledgeable of.
Are REO's a bargain in Austin?
It is commonly though that any REO must be a bargain and an possibility 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 fast, 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. It is possible to find REOs with money-making potential, and many people do very well buying foreclosures. However there are also many REO's that are not good buys and may lose money.
Time 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. 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 concerning the condition of the property and what their process is for accepting offers. Since banks most commonly sell REO properties "as is", it may be in your best interest to include an inspection contingency in your offer that gives you time to check for hidden damage and retract 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 submitted 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 submit another counter offer. Realize, 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 unusual for the process of offers and counter offers to take days or even weeks.