Buying a foreclosure or REO property in

What is an REO?

REO is Real Estate Owned. These are homes that have gone through foreclosure and are currently possessed by the bank or mortgage company. This is not the same as a property up for foreclosure auction. If you buy 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 willing to pay with cash in hand. Finally, you'll accept the property completely as is. That possibly could comprise current liens and even current residents that need to be thrown out.

A REO, on the contrary, is a much cleaner and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The bank will handle 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 do not have to give a Transfer Disclosure Statement, a document that usually requires sellers to tell you about any defects of which they are informed.

Are REO's a bargain in Santa Fe?

It's occasionally though that any REO must be a good deal and an possibility for easy money. This just isn't 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 usually anxious to sell it soon, 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. It is possible to find REOs with money-making potential, and many people do very well buying foreclosures. Still there are also many REO's that are not good buys and not likely to turn a profit.

All set to make an offer?

Most banks have a REO department that you'll work with while buying a REO property from them. Normally 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 discover as much as you can about what they know about the condition of the property and what their process is for accepting offers. Since banks almost always 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 hidden 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. After you've made your offer, you can expect the bank to counter offer. From there it will be your decision whether to accept their counter, or make another counter offer. Realize, you'll be dealing with a process that probably involves several people at the bank, and they don't work evenings or weekends. It's typical for the process of offers and counter offers to take days or even weeks.