Purchasing REO property or a property in foreclosure ?
Foreclosed upon and bank owned property purchases require the assistance of an experience professional.
What is an REO?
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. You must also be willing to pay with cash in hand. If you don't have the cash in hand, there are bridge loan lenders that could lend you money short term. These lenders' charges an higher interest rate and higher fees. To top everything off, you'll get the property 100% as is. That possibly may involve prevailing liens and even current occupants that need to be evicted.
"REO" or Real Estate Owned are homes which have gone through foreclosure that the bank or mortgage company currently holds. This differs from a property up for foreclosure auction.
A REO or bank-owned property, by contrast, is a more tidy and attractive proposition. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The lender will handle the removal of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing.
You should be aware that REOs may be exempt from standard disclosure requirements.
For example, in Washington, banks do not have to give a Seller Disclosure Statement, known as a Form 17, a document that requires sellers to tell you about any defects of which they are knowledgeable.
By hiring Berkshire Hathaway Home Services Northwest Real Estate, you can rest assured knowing all parties are fulfilling Washington state disclosure requirements.
Are REO properties a bargain in Bellevue?
It's frequently assumed that any REO must be a good deal and a possibility for guaranteed profit. This frequently isn't true. You have to be cautious about buying a repossessed property if your intent is to make money. Even though the bank is usually eager to sell it soon, they are also motivated to minimize any losses.
Look carefully at the listing and sales prices of comparable homes 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. But, there are also many REOs that are not good buys and may lose money.
Time to make an offer?
Most lenders have a department dedicated to REO that you'll work with while buying REO property from them. To get their properties advertised on the local MLS, the lender will often contract with 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 their knowledge about the condition of the property and what their process is for receiving offers. Since banks most commonly 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 retract the offer if you find it.
As with making any offer on real estate, providing documentation showing your ability to secure financing 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 counter offer. From there it will be your decision whether to accept their counter, or offer a counter to the counter offer.
Understand, you'll be contending 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. Northwest Real Estate is accustomed to these situations and will work to ensure there are no unnecessary delays.