"REO" or Real Estate Owned are homes which have gone through foreclosure and are currently possessed by the bank or mortgage company. 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 added during the foreclosure process. You must also be ready to pay with cash in hand. To top everything off, you'll receive the property 100% as is. That might involve prevailing liens and even current denizens that need to be put out.
A bank-owned property, conversely, is a much cleaner and attractive option. The REO property was unable to find a buyer during foreclosure auction. The bank now owns it. The bank will take care of the removal of tax liens, evict occupants if needed and generally arrange 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. For example, in Texas, it is optional for foreclosures to have a Property Disclosure Statement, a document that ordinarily requires sellers to disclose any defects they are aware of. By hiring Mattucci Real Estate, you can rest assured knowing all parties are fulfilling California state disclosure requirements.
Are REO properties a bargain in Los Angeles County?It's sometimes believed that any REO must be a good deal and a chance for guaranteed profit. This often isn't true. You have to be prudent about buying a REO if your intent is profit from the sale. Even though the bank is typically eager to sell it fast, they are also looking to minimize any losses.
Look carefully at the listing and sales prices of competing homes in the neighborhood when considering the purchase of an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. Still there are also many REOs that are not good buys and may not be money makers.
Prepared to make an offer?
Most mortgage companies have staff dedicated to REO that you'll work with in buying REO property from them. To get their properties advertised on the local MLS, the lender will usually use a listing agent.
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 their knowledge 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. If, as a buyer, you can provide documentation demonstrating your ability to pay, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This goes for any real estate offer.)
Once you've presented your offer, it's customary for the bank to counter offer. Then it will be your choice whether to accept their counter, or make another counter offer. Your deal might be final in one day, but that's rare. Since offers and counter offers usually give the other party a day or longer to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer. Mattucci Real Estate is are used to working around the schedules of this type of seller and will do everything possible to ensure there are no undue delays.
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