Buying a REO or foreclosure in Landrum
What is an REO?
REO means Real Estate Owned. These are homes which 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 amassed during the foreclosure process. You must also be prepared to pay with cash in hand. To top everything off, you'll receive the property entirely as is. That could comprise standing liens and even current residents that need to be expelled.
A REO, by contrast, is a much cleaner and attractive option. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The lender will deal with 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. Do be aware that REOs may be exempt from typical disclosure requirements. For example, in California, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to tell you about any defects they are knowledgeable of.
Is an REO in Landrum a bargain?
It is sometimes though that any REO must be a steal and an chance for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is profit from the sell. While it's true that the bank is usually 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. The bargains with money making potential exist, and many people do very well buying and selling 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 when buying a REO property from them. Commonly 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 learn as much as you can about what they know regarding the condition of the property and what their process is for getting offers. Since banks most commonly 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 unseen 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 presented your offer, you can expect the bank to counter offer. Then it will be your decision whether to accept their counter, or make another 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 not unusual for the process of offers and counter offers to take days or even weeks.