Buying a REO or foreclosure in Santa Fe
What's an REO?
REO's or Real Estate Owned are properties that have been foreclosed upon which the bank or mortage company currently possesses. 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 accumulated during the foreclosure process. The buyer must also be ready to pay with cash in hand. And on top of all that, you'll receive the property completely as is. That could include standing liens and even current residents that need to be kicked out.
A REO, on the other hand, is a much cleaner and attractive transaction. The REO property didn't find a buyer during foreclosure auction. The lender now owns it. The bank will attend to the removal of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing. Take notice 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 typically requires sellers to tell you about any defects of which they are informed.
Is an REO in Santa Fe a bargain?
It's sometimes assumed that any REO must be a good buy 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 often anxious to sell it quickly, they are also strongly motivated to get as much as they can for it. When contemplating 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. The bargains with money making potential exist, and many people do very well flipping foreclosures. But there are also many REO's that are not good buys and may lose money.
All set 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 regarding the condition of the property and what their process is for getting offers. Since banks typically sell REO properties "as is", it may be in your best interest to include an inspection contingency in your offer that gives you time to check for unseen damage and cancel 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 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. Be aware, you'll be dealing 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.