Buying REO property or a foreclosure in Davenport?
Smart consumers will turn to a seasoned pro when considering a foreclosed property.
What's an REO?
"REO" is short for Real Estate Owned. These are houses which have been foreclosed upon and are currently held by the bank or mortgage company. This differs from 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 added during the foreclosure process. The buyer must also be ready to pay with cash in hand. To top everything off, you'll accept the property completely as is. That might consist of current liens and even current tenants that may require expulsion.
A bank-owned property, on the other hand, is a much cleaner and attractive option. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The lender will attend to the elimination of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing.
Is REO property in Davenport a bargain?
It's frequently assumed that any foreclosure must be a bargain and a possibility for easy money. This isn't necessarily the case. You have to be cautious about buying a REO if your intent is make money. Even though the bank is usually eager to sell it fast, they are also looking to get as much as they can for it.
When pondering the value of a foreclosure, carefully analyze 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. Still there are also many REOs that are not good buys and not likely to turn a profit.
Time to make an offer?
Most banks have a department dedicated to REO that you'll work with while buying REO property from them. Normally the REO department will use a listing agent to get their REO properties listed on the local MLS. It is very important to have a seasoned realtor represent you who is certified (SFR) in distressed properties. I have certification as a Short Sale and Foreclosure Resource.
Before making your offer, you'll want your agent to contact either the listing agent or REO department at the bank and discover as much as she can about their knowledge regarding the condition of the property and what their process is for getting offers. Since banks almost always sell REO properties "as is", you may want to include an inspection contingency in your offer that gives you time to check for hidden damage and withdraw the offer if you find it. As with making any offer on real estate, providing documentation proving your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender.
Once you've presented 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 contending with a process that generally involves several people at the bank, and they don't work evenings or weekends. It's typical for there to be days or even weeks of negotiating back and forth. Your agent will be the one negotiating for you.
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When pondering the value of a foreclosure, carefully analyze 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. Still there are also many REOs that are not good buys and not likely to turn a profit.