Buying a foreclosure or REO property in

What's an REO?

REO's or Real Estate Owned are homes that have gone through foreclosure and are now possessed 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. The buyer 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 might consist of current liens and even current tenants that may require eviction.

A REO, on the other hand, is a much neater and attractive transaction. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will deal with the elimination 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. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to disclose any defects they are knowledgeable of.

Is an REO in Fort Walton Beach a bargain?

It's occasionally presume that any REO must be a bargain and an possibility for easy money. This isn't always true. You have to be very careful about buying a REO if your intent is make money. While it's true that the bank is typically anxious to sell it fast, they are also strongly encouraged 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 buying and selling foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.

Ready to make an offer?

Most banks have a REO department that you'll work with while buying a 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 learn as much as you can about what they know about the condition of the property and what their process is for taking offers. Since banks usually 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, 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. Once you've made your offer, you can expect the bank to respond with a counter offer. At this point it will be up to you to decide whether to accept their counter, or make another counter offer. Understand, you'll be working with a process that generally 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.

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