Investing in a bank-owned property is not something to be taken casually.
What is an REO?
“REO” means Real Estate Owned. These are houses which have completed the foreclosure process and are now owned by the bank or mortgage company. 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 accrued during the foreclosure process. You must also be ready to pay with cash in hand. And on top of all that, you’ll get the property 100% as is. That possibly could involve prevailing liens and even current occupants that may require eviction.
A bank-owned property, by contrast, is a much cleaner and attractive proposition. The REO property didn’t find a buyer during foreclosure auction. The bank now owns it. The lender will handle the removal 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 standard disclosure requirements. For example, in Texas, it is optional for foreclosures to have a Property Disclosure Statement, a document that usually requires sellers to reveal any defects they are informed of. By hiring Coldwell Banker At The Shore, you can rest assured knowing all parties are fulfilling New Jersey state disclosure requirements.
Is REO property in Brigantine a bargain?
It is occasionally presumed that any foreclosure must be a steal and a possibility for guaranteed profit. This isn’t always true. You have to be cautious about buying repossession if your intent is profit from the sale. Even though the bank is typically eager to sell it promptly, they are also motivated to minimize any losses.
Look carefully at the listing and sales prices of similar properties in the neighborhood when making an offer on an REO. And factor in any repairs or remodeling necessary to prepare the house for resale or moving in. The bargains with money making potential exist, and many people do very well buying and selling foreclosures. But there are also many REOs that are not good buys and may not be money makers.
Time to make an offer?
Most banks have a department dedicated to REO that you’ll work with in buying REO property from them. Commonly 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 discover as much as you can about their knowledge about the condition of the property and what their process is for receiving 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 unknown damage and retract the offer if you find it. If, as a buyer, you can provide documentation proving your ability to secure financing, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This goes for any type of real estate offer.)
Once you’ve presented your offer, it’s customary for the bank to counter offer. From there it will be your choice whether to accept their counter, or offer a counter to the counter offer. Realize, you’ll be contending with a process that probably 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.
