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What is an REO?

REO means Real Estate Owned. These are houses which have completed the foreclosure process and are now possessed 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 ready to pay with cash in hand. And on top of all that, you'll get the property entirely as is. That possibly will include prevailing liens and even current residents that need to be thrown out.

A REO, on the other hand, is a much cleaner and attractive proposition. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The bank will deal with the removal of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing. Do be aware that REOs may be exempt from standard disclosure requirements. For instance, in Calfornia, banks do not have to give a Transfer Disclosure Statement, a document that usually requires sellers to reveal any defects of which they are knowledgeable.

Are REO's a bargain in Lewisburg?

It's sometimes though that any REO must be a bargain and an opportunity for easy money. This just isn't true. You have to be cautious about buying a REO if your intent is make a profit. While it's true that the bank is typically anxious to sell it promptly, they are also strongly interested to get as much as they can for it. When considering 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 not be money makers.

Prepared to make an offer?

Most lenders have a REO department that you'll work with when buying a REO property from them. Normally 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 find out as much as you can about what they know concerning the condition of the property and what their process is for receiving 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 terminate the offer if you find it.

As with making any offer on real estate, your offer may be 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 counter offer. From there it will be your choice whether to accept their counter, or make another counter offer. Be aware, you'll be contending with a process that most likely 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.

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