Buying a foreclosure or REO property in

What is an REO?

REO is short for Real Estate Owned. These are properties that have completed the foreclosure process and are presently possessed by the bank or mortgage company. This is different than 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 could consist of standing liens and even current tenants that may require expulsion.

A REO, conversely, is a much cleaner and attractive option. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The lender will handle 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 normal disclosure requirements. In California, for example, banks are not required to give a Transfer Disclosure Statement, a document that usually requires sellers to tell you about any defects they are informed of.

Is an REO in Branson a bargain?

It's occasionally assumed that any REO must be a bargain and an chance for easy money. This just isn't 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 typically anxious to sell it quickly, they are also strongly motivated 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. The bargains with money making potential exist, and many people do very well buying and selling foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.

All set to make an offer?

Most lenders have a REO department that you'll work with in buying a REO property from them. Normally 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 regarding the condition of the property and what their process is for receiving offers. Since banks usually 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 unknown damage and terminate the offer if you find it.

As with making any offer on real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. Once you've presented 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. Be aware, you'll be working with a process that usually involves multiple 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.

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