Looking for a foreclosure or REO property in ?

What is an REO?

REO is an abbreviation for Real Estate Owned. These are houses which have been foreclosed upon which the bank or mortage company now possesses. This differs from a property 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 amassed during the foreclosure process. You must also be prepared to pay with cash in hand. And on top of all that, you'll accept the property totally as is. That possibly could include current liens and even current occupants that need to be put out.

A REO, conversely, is a much neater and attractive proposition. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The lender will handle 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. Take notice that REOs may be exempt from standard disclosure requirements. For instance, in Calfornia, banks do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects of which they are informed.

Is an REO in Santa Fe a bargain?

It's commonly assumed that any REO must be a good deal and an opportunity for easy money. This usually isn't 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 soon, they are also strongly motivated 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 flipping foreclosures. Still there are also many REO's that are not good buys and may lose money.

Time to make an offer?

Most mortgage companies 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 learn 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 almost always sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unknown damage and cancel the offer if you find it.

As with making any offer on real estate, your offer may be more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. After you've made your offer, you can expect the bank to counter offer. Then it will be your decision whether to accept their counter, or submit another counter offer. Realize, you'll be contending with a process that generally involves multiple 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.