Buying a REO or foreclosure in Oil City
What's an REO?
REO's or Real Estate Owned are houses which have completed the foreclosure process which the bank or mortage company now possesses. This is unlike 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 able to pay with cash in hand. Finally, you'll accept the property totally as is. That possibly could include current liens and even current denizens that may require eviction.
A REO, conversely, 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 arrange for the issuance of a title insurance policy to the buyer at closing. Note 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 make known any defects of which they are knowledgeable.
Are REO's a bargain in Oil City?
It is occasionally though that any REO must be a bargain and an opportunity for easy money. This isn't necessarily true. You have to be cautious 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 soon, they are also strongly encouraged 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. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. But there are also many REO's that are not good buys and may not be money makers.
All set to make an offer?
Most banks have a REO department that you'll work with when buying a REO property from them. Typically 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 find out 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 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 unknown 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. Once you've submitted your offer, you can expect the bank to counter offer. At this point it will be up to you to decide whether to accept their counter, or submit another counter offer. Understand, you'll be dealing with a process that most likely 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.