What is an REO?
“REO” is short for Real Estate Owned. These are properties which have gone through foreclosure that the bank or mortgage company now holds. This differs from 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 amassed during the foreclosure process. You must also be ready to pay with cash in hand. Finally, you’ll accept the property completely as is. That could involve existing liens and even current residents that may require eviction.
A bank-owned property, on the other hand, is a much neater and attractive option. The REO property was unable to find a buyer during foreclosure auction. The bank now owns it. The lender will attend to 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.
You should be aware that REOs may be exempt from typical disclosure requirements. For example, in some states, it is optional for foreclosures to have a Property Disclosure Statement, a document that normally requires sellers to make known any defects of which they are informed. By hiring us, you can rest assured knowing all parties are fulfilling Florida state disclosure requirements.
Is REO property in Orlando a bargain?
It’s frequently thought that any foreclosure must be a good deal and a chance for easy money. This isn’t always the case. You have to be very careful about buying an REO if your intent is profit from the sale. Even though the bank is often anxious to offload it promptly, they are also motivated to minimize any losses.
Look carefully at the listing and sales prices of comparable properties in the neighborhood when making an offer on an REO, and factor in any repairs or upgrades necessary to prepare the house for resale or moving in. There are bargains with potential to make money, and many people do very well buying foreclosures. However there are also many REOs that are not good buys and may not be money makers.
Prepared to make an offer?
Most mortgage companies have staff dedicated to REO that you’ll work with in buying REO property from them. To get their properties advertised on the local MLS, the lender will frequently hire a listing agent.
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 regarding the condition of the property and what their process is for receiving offers. Since banks usually sell REO properties “as is”, it may be in your best interest 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, 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, it’s customary for the bank to respond with a counter offer. Then it will be up to you to decide whether to accept their counter, or submit another counter offer. Your deal could be final in one day, but that’s rare. Since offers and counter offers usually give the other party a day or longer to respond (and employees at a bank don’t work nights or weekends) you could be looking at a week or longer. We are accustomed to these situations and will work to ensure there are no unnecessary delays.