Foreclosures and REO Buying bank owned properites
There is a lot of interest in buying bank owned properties these days. A lot of information, some good some bad, is floating aroun about the subjet. Often the information offered is for sale, with the promise that you can make a lot of money with litte effort once you know" the secret formula". The fact isthat ther are no secrets, and to make money does require effort.
 Wath is a Pre-foreclosure?:
When a home owner begins missing a mortgage payments the bank or lender has the right to begin a foreclosure action to take the home and sell ti at auction to recuperate the money the lent.
Before the bank can do that they must publish a notice that says the homeowner has X number of days to bring the loan payments current or they will size the home.
The period between the time the notice is published and the date that the bank can take the home is the "preforeclosure" period.
Wath's an REO?. REO stansd for"Real Estate Owned". These are properties that have gone through foreclosure and are now owned by the bank or mortgage company. This is not the same as property up for foreclosur auction.When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accumulated durin the foreclosure process.Yuo must also be prepared to pay with cash in hand. And on top of all that, you'll receive the property 100% "as is". That could include existings liens and even current occupants that needs to be evicted>A REO, by contrast, is much "cleaner" and attractive transaction> The REO property did not find buyer during foreclosure auction The bank owns it. The bank will see the removal of tax liens, evict occupants if needed and eneraly prepare for the issuance of a insurance policy at closing> Do be aware that REO's may be exempt for normal disclosure requirements. In California, for example, banks are expempt to tell you about any defects they are aware of.
It is a bargain?
It's commonly assumed that any REO must be a bargain and an opportunity foreasy money. This simply isn't true. You have to be very careful about buying a REO if you interest is to make money off of it. While it's true that the bank istypically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it. When considering the value of a REO, You need,to look closely at comparables 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 foreclosures. But there are also many REO's that not good buys and not likely to turn a profit.
Most banks have a REO department that you'll work with in buying a REO proerty from them. Typically the REO department will use a listing
agent to get their REO properties listed on the local MLS. Before making your ofer, you'll want to contact either the listing agent or REO
department at the bank and find out 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 foe hidden damages and terminate the offer if you find out it. As with making any offer in
real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, such as pre-approval letter
from a lender. After you've made your offer, you can expect the bank to make a counter offer. Then it will be up to you to decide whether
to accept their counter, or offer a counter to the counter offer.Realize,you'll be dealing with a process that probably involves multiple
people at the bankk, and they don't work evenings or weekends. It's not unusual for the process of offers and counters offers to take days
or even weeks.
That's way I'm giving you this brief explanation about how the REO and foreclosure works so you can have an idea of the importance
of using a professional real estate agent to help you in this process, so you can be confident about the purchase of your next REO property.
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