Buying a REO or foreclosure in Santa Fe
What's an REO?
REO's or Real Estate Owned are properties which have been foreclosed upon which the bank or mortage company now possesses. This differs from 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 amassed during the foreclosure process. You must also be willing to pay with cash in hand. And on top of all that, you'll receive the property totally as is. That possibly may comprise existing liens and even current denizens that need to be put out.
A REO, on the other hand, is a much neater and attractive transaction. The REO property didn't find a buyer during foreclosure auction. Now the bank owns it. The bank will handle the removal of tax liens, evict occupants if needed and generally plan 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 do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to disclose any defects of which they are knowledgeable.
Are REO's a bargain in Santa Fe?
It's sometimes presume that any REO must be a good buy and an opportunity for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is to make money off of it. While it's true that the bank is typically anxious to sell it promptly, 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. The bargains with money making potential exist, and many people do very well flipping foreclosures. However 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 mortgage companies have a REO department that you'll work with in 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 receiving offers. Since banks most commonly 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 unknown damage and terminate 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 your choice whether to accept their counter, or offer a counter to the counter offer. Be aware, 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 quite common for the process of offers and counter offers to take days or even weeks.