Buying a REO or foreclosure in Mountain Ranch
What's an REO?
REO stands for Real Estate Owned. These are properties which have been foreclosed upon and are currently owned by the bank or mortgage company. This is unlike 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 accumulated during the foreclosure process. The buyer must also be prepared to pay with cash in hand. And on top of all that, you'll get the property completely as is. That might consist of prevailing liens and even current residents that need to be expelled.
A REO, on the contrary, is a much cleaner and attractive option. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The lender will deal with 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. Do be aware that REOs may be exempt from typical disclosure requirements. For instance, in Calfornia, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to make known any defects of which they are aware.
Are REO's a bargain in Mountain Ranch?
It's occasionally though that any REO must be a bargain and an chance for easy money. This isn't always true. You have to be very careful about buying a REO if your intent is make a profit. While it's true that the bank is typically anxious to sell it soon, they are also strongly motivated to get as much as they can for it. When considering 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 not be money makers.
Prepared to make an offer?
Most lenders have a REO department that you'll work with when buying a REO property from them. Typically 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 taking offers. Since banks typically sell REO properties "as is", you may want to include an inspection contingency in your offer that gives you time to check for unseen damage and retract 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. After you've presented your offer, you can expect the bank to respond with a counter offer. From there it will be your choice whether to accept their counter, or make another counter offer. Be aware, you'll be dealing with a process that usually 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.