Just as with any property purchase, your smartest move is to hire a professional real estate agent. If you have any questions about real estate in Roanoke, Virginia, call me or send me an e-mail.
What is an REO?
"REO" or Real Estate Owned are properties which have been foreclosed upon that the bank or mortgage company currently possesses. This is not the same as a property 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 accumulated during the foreclosure process. You must also be ready to pay with cash in hand. To top everything off, you'll get the property 100% as is. That might include standing liens and even current tenants that may require eviction.
A bank-owned property, on the other hand, is a much cleaner and attractive transaction. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The lender will see to 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 typical disclosure requirements. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to reveal any defects they are informed of. By hiring MKB, REALTORS, you can rest assured knowing all parties are fulfilling Virginia state disclosure requirements.
Are REO properties a bargain in Roanoke?
It's frequently presumed that any REO must be a bargain and a chance for easy money. This isn't always the case. You have to be cautious about buying a repossession if your intent is make money. While it's true that the bank is often anxious to offload it quickly, they are also motivated to minimize any losses.
When contemplating the value of a foreclosure, carefully analyze 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 flipping foreclosures. However there are also many REOs that are not good buys and may lose money.
Ready to make an offer?
Most mortgage companies have staff dedicated to REO that you'll work with in buying REO property from them. Usually 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 their knowledge regarding the condition of the property and what their process is for getting 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 retract the offer if you find it. If, as a buyer, you can provide documentation demonstrating your ability to pay, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This is generally true for any real estate offer.)
After you've submitted your offer, it's customary for the bank to respond with a counter offer. At this point it will be your choice whether to accept their counter, or make another counter offer. Your transaction might be final in a single day, but that's rare. Since offers and counter offers usually allow a day or more for the other party to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer.
When contemplating the value of a foreclosure, carefully analyze 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 flipping foreclosures. However there are also many REOs that are not good buys and may lose money.