Buying a REO or foreclosure in West Palm Beach
What is an REO?
REO is Real Estate Owned. These are homes that have completed the foreclosure process and are currently possessed by the bank or mortgage company. This differs from a property 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 accrued during the foreclosure process. You must also be willing to pay with cash in hand. Finally, you'll accept the property completely as is. That possibly may comprise prevailing liens and even current denizens that need to be put out.
A REO, on the other hand, is a much cleaner and attractive transaction. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The lender will attend to the elimination of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing. Note that REOs may be exempt from typical disclosure requirements. For instance, in Calfornia, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects they are informed of.
Are REO's a bargain in West Palm Beach?
It's frequently assumed that any REO must be a good buy and an possibility for easy money. This isn't always true. You have to be cautious about buying a REO if your intent is profit from the sell. While it's true that the bank is often anxious to sell it quickly, 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. But there are also many REO's that are not good buys and may not be money makers.
Prepared to make an offer?
Most banks have a REO department that you'll work with while 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. 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 getting offers. Since banks most commonly 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 hidden damage and withdraw 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 respond with a counter offer. At this point 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 probably involves several people at the bank, and they don't work evenings or weekends. It's typical for the process of offers and counter offers to take days or even weeks.