Buying a REO or foreclosure in Oil City
What is an REO?
REO's or Real Estate Owned are homes which have been foreclosed upon and are presently held by the bank or mortgage company. This differs from real estate 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. The buyer must also be willing to pay with cash in hand. To top everything off, you'll get the property entirely as is. That could consist of prevailing liens and even current occupants that need to be expelled.
A REO, conversely, is a much neater and attractive option. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank will attend to the removal 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 normal disclosure requirements. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are aware of.
Is an REO in Oil City a bargain?
It is occasionally believed that any REO must be a bargain and an possibility 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 often anxious to sell it quickly, they are also strongly motivated 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. But there are also many REO's that are not good buys and not likely to turn a profit.
Time to make an offer?
Most mortgage companies have a REO department that you'll work with while buying a REO property from them. Usually 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 concerning the condition of the property and what their process is for taking offers. Since banks usually sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unknown damage and withdraw the offer if you find it.
As with making any offer on real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. Once you've submitted your offer, you can expect the bank to counter offer. From there 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 generally involves multiple people at the bank, and they don't work evenings or weekends. It's not unusual for the process of offers and counter offers to take days or even weeks.