Looking for a foreclosure or REO property in ?
What is an REO?
REO stands for Real Estate Owned. These are properties that have completed the foreclosure process which the bank or mortage company presently holds. 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 added during the foreclosure process. You must also be willing to pay with cash in hand. Finally, you'll accept the property completely as is. That possibly could include current liens and even current denizens that may require expulsion.
A REO, by contrast, is a much neater and attractive deal. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The lender will deal with the elimination of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. You should be aware 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 usually requires sellers to make known any defects they are aware of.
Is an REO in Baltimore a bargain?
It's frequently presume that any REO must be a good deal and an opportunity for easy money. This isn't necessarily true. You have to be very careful about buying a REO if your intent is profit from the sell. While it's true that the bank is usually anxious to sell it promptly, 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 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 flipping foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.
Time 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. Prior to making your offer, 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 accepting offers. Since banks most commonly 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 unseen 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. Once you've submitted your offer, you can expect the bank to 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 contending with a process that usually involves several 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.