Making an offer on REO property or a foreclosure in Orange County?
Savvy consumers will turn to a seasoned pro when considering the purchase of a foreclosed property. For more information, simply contact us
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What is an REO?
"REO" stands for Real Estate Owned. These are homes which have been through foreclosure and are presently held by the bank or mortgage company. This is not the same as 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 amassed during the foreclosure process. The buyer must also be willing to pay with cash in hand. To top everything off, you'll accept the property completely as is. That possibly could include prevailing liens and even current occupants that need to be removed.
A bank-owned property, conversely, is a much cleaner and attractive proposition. 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 prepare for the issuance of a title insurance policy to the buyer at closing.
Take notice that REOs may be exempt from normal disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to reveal any defects they are informed of. By hiring Tom Bertog, you can rest assured knowing all parties are fulfilling California state disclosure requirements.
Are REO properties a bargain in Orange County?
It is frequently believed that any REO must be a good buy and an opportunity for guaranteed profit. This often isn't true. You have to be cautious about buying a REO if your intent is to profit from the sale. While it's true that the bank is usually eager to sell it quickly, they are also looking to minimize any losses.
When contemplating what to pay for a foreclosure, carefully analyze 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. The bargains with money making potential exist, and many people do very well flipping foreclosures. Still, there are also many REOs that are not good buys and not likely to turn a profit.
Ready to make an offer?
Most banks have staff dedicated to REO that you'll work with while buying 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 their knowledge regarding the condition of the property and what their process is for accepting offers. Since banks usually sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unseen damage and withdraw 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 holds for any real estate offer.)
Once you've submitted your offer, it's customary for the bank to make a counter offer. At this point it will be your decision whether to accept their counter, or offer a counter to the counter offer. Your deal might be settled in one day, but that's rare. Since offers and counter offers usually allow a day or more for the other party to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer.