Buying a foreclosure or REO property in

What is an REO?

REO is Real Estate Owned. These are houses which have gone through foreclosure and are presently owned by the bank or mortgage company. This is unlike 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 able to pay with cash in hand. And on top of all that, you'll get the property one-hundred percent as is. That possibly will consist of standing liens and even current occupants that may require expulsion.

A REO, by contrast, is a more tidy and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The bank will see to the removal of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing. Do be aware that REOs may be exempt from typical disclosure requirements. For example, in California, banks are not required to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to make known any defects they are knowledgeable of.

Is an REO in Santa Fe a bargain?

It is occasionally though that any REO must be a bargain and an opportunity for easy money. This just isn't true. You have to be cautious 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 quickly, 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. There are bargains with potential to make money, and many people do very well buying foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.

Prepared to make an offer?

Most lenders have a REO department that you'll work with in 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. Before 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 regarding the condition of the property and what their process is for receiving offers. Since banks usually 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 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. Once you've made your offer, you can expect the bank to counter offer. From there it will be your choice whether to accept their counter, or make another counter offer. Be aware, you'll be contending with a process that usually involves a group of people at the bank, and they don't work evenings or weekends. It's typical for the process of offers and counter offers to take days or even weeks.