Buying a REO or foreclosure in Oil City
What's an REO?
REO is short for Real Estate Owned. These are properties that have been foreclosed upon and are presently possessed by the bank or mortgage company. 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 accrued during the foreclosure process. The buyer must also be willing to pay with cash in hand. And on top of all that, you'll accept the property totally as is. That possibly may include existing liens and even current occupants that need to be thrown out.
A REO, on the contrary, is a much neater and attractive option. The REO property did not 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. Do be aware that REOs may be exempt from standard disclosure requirements. For instance, in Calfornia, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to reveal any defects of which they are knowledgeable.
Is an REO in Oil City a bargain?
It's commonly presume that any REO must be a bargain and an possibility for easy money. This isn't necessarily true. You have to be very careful about buying a REO if your intent is profit from the sell. While it's true that the bank is often anxious to sell it fast, they are also strongly interested 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. There are bargains with potential to make money, and many people do very well flipping foreclosures. Still there are also many REO's that are not good buys and not likely to turn a profit.
Prepared to make an offer?
Most banks have a REO department that you'll work with when 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. Prior to 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 cancel 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 submitted your offer, you can expect the bank to respond with a counter offer. Then it will be your choice whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be working with a process that most likely involves multiple 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.