Making an offer on REO property or a foreclosure in Mission Viejo?
Investing in a bank-owned property is not something to be taken casually.
What is an REO?
"REO" or Real Estate Owned are homes which have been foreclosed upon that the bank or mortgage company presently possesses. This is different than 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 ready to pay with cash in hand. Finally, you'll receive the property 100% as is. That possibly could include current liens and even current tenants that need to be expelled.
A bank-owned property, on the other hand, is a more tidy and attractive proposition. The REO property didn't find a buyer during foreclosure auction. Now the bank owns it. The bank will handle the elimination of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing.
Take notice that REOs may be exempt from typical disclosure requirements.
For example, in Nevada, it is optional for foreclosures to have a Property Disclosure Statement,
a document that usually requires sellers to tell you about any defects of which they are knowledgeable.
By hiring The Alden Team, you can rest assured knowing all parties are fulfilling California state disclosure requirements.
Is REO property in Mission Viejo a bargain?
It is sometimes thought that any foreclosure must be a steal and an opportunity for easy money. This often isn't true. You have to be very careful about buying a repossession if your intent is to make a profit. While it's true that the bank is often eager to offload it quickly, they are also motivated to get as much as they can for it.
Look carefully at the listing and sales prices of similar properties in the neighborhood when making an offer on an REO. And factor in any repairs or remodeling necessary to prepare the house for resale or moving in.
It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. But, there are also many REOs that are not good buys and may not be money makers.
Ready 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 frequently 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 learn as much as you can about their knowledge about 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 unknown damage and withdraw the offer if you find it.
As with making any offer on real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, 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. At this point it will be up to you to decide whether to accept their counter, or make another counter offer.
Your deal might be final in a single day, but that's usually not the case. Since offers and counter offers usually give the other party a day or longer to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer.