Making an offer on REO property or a foreclosure in California?

What is an REO?

"REO" is short for Real Estate Owned. These are properties which have been foreclosed upon and are presently owned 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. You must also be able to pay with cash in hand. Finally, you'll receive the property entirely as is. That could involve prevailing liens and even current occupants that need to be put out.

A bank-owned property, on the other hand, is a much neater and attractive deal. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The lender will deal with the removal of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing.

You should be aware that REOs may be exempt from normal disclosure requirements. For example, in Texas, it is optional for foreclosures to have a Property Disclosure Statement, a document that typically requires sellers to reveal any defects they are knowledgeable of. By hiring Toni Williams, you can rest assured knowing all parties are fulfilling California state disclosure requirements.

Am I guaranteed a good deal when buying a bank owned property in California?

It's frequently thought that any foreclosure must be a good buy and a chance for guaranteed profit. This isn't necessarily the case. You have to be cautious about buying a REO if your intent is to make a profit. Even though the bank is often anxious to sell it fast, they are also looking to minimize any losses.

When pondering the value of REO property, 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 flipping foreclosures. Still, there are also many REOs that are not good buys and not likely to turn a profit.

All set to make an offer?

Most mortgage companies have a department 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 usually use 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 about the condition of the property and what their process is for taking offers. Since banks almost always 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 unknown damage and retract the offer if you find it. If, as a buyer, you can provide documentation proving your ability to pay, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This holds for any type of real estate offer.)

Once you've submitted your offer, it's customary for the bank to respond with a counter offer. From there it will be up to you to decide whether to accept their counter, or make another counter offer. Realize, you'll be working with a process that generally involves several 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.