Buying a REO or foreclosure in West Palm Beach

What's an REO?

REO's or Real Estate Owned are homes that have completed the foreclosure process which the bank or mortage company presently holds. 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. The buyer must also be prepared to pay with cash in hand. To top everything off, you'll get the property entirely as is. That possibly will consist of existing liens and even current residents that need to be put out.

A REO, by contrast, is a more tidy and attractive deal. The REO property didn't 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. Do be aware that REOs may be exempt from typical disclosure requirements. For example, in California, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects they are aware of.

Are REO's a bargain in West Palm Beach?

It is sometimes though that any REO must be a bargain and an possibility for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is to make money off of it. While it's true that the bank is often anxious to sell it fast, they are also strongly encouraged to get as much as they can for it. When pondering 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 flipping foreclosures. Still there are also many REO's that are not good buys and may lose money.

Ready to make an offer?

Most mortgage companies have a REO department that you'll work with when buying a REO property from them. Typically the REO department will use a listing agent to get their REO properties listed on the local MLS. Before making your offer, you'll want to contact either the listing agent or REO department at the bank and find out as much as you can about what they know regarding the condition of the property and what their process is for taking offers. Since banks most commonly 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 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. After you've made your offer, you can expect the bank to make a counter offer. Then it will be your choice whether to accept their counter, or make another counter offer. Realize, you'll be working with a process that most likely 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.