Buying a REO or foreclosure in Mineral Wells
What is an REO?
REO is short for Real Estate Owned. These are homes that have gone through foreclosure which the bank or mortage company presently owns. This is not the same as 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 accrued during the foreclosure process. You must also be willing to pay with cash in hand. Finally, you'll get the property one-hundred percent as is. That possibly will comprise prevailing liens and even current residents that need to be evicted.
A REO, by contrast, is a more tidy and attractive transaction. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The lender will handle 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. Take notice that REOs may be exempt from normal disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to make known any defects they are knowledgeable of.
Is an REO in Mineral Wells a bargain?
It's sometimes assumed that any REO must be a good deal and an possibility for easy money. This isn't always true. You have to be cautious about buying a REO if your intent is make money. While it's true that the bank is typically anxious to sell it fast, they are also strongly motivated 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 buying and selling foreclosures. Still there are also many REO's that are not good buys and not likely to turn a profit.
Time to make an offer?
Most banks 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. Before 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 concerning the condition of the property and what their process is for accepting offers. Since banks almost always 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 terminate 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 make a counter offer. From there it will be your decision whether to accept their counter, or offer a counter to the counter offer. Be aware, you'll be working with a process that usually involves multiple people at the bank, and they don't work evenings or weekends. It's not uncommon for the process of offers and counter offers to take days or even weeks.