Buying a REO or foreclosure in Niceville
What's an REO?
REO's or Real Estate Owned are properties that have completed the foreclosure process and are presently owned by the bank or mortgage company. This is unlike 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 added during the foreclosure process. You must also be prepared to pay with cash in hand. Finally, you'll accept the property one-hundred percent as is. That possibly may include prevailing liens and even current denizens that may require expulsion.
A REO, by contrast, is a much neater and attractive proposition. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The lender will attend to the removal 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 normal disclosure requirements. For example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to disclose any defects of which they are aware.
Are REO's a bargain in Niceville?
It is commonly assumed that any REO must be a bargain and an possibility for easy money. This just isn't true. You have to be prudent about buying a REO if your intent is make money. While it's true that the bank is often anxious to sell it promptly, they are also strongly motivated 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 buying foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.
Ready to make an offer?
Most mortgage companies have a REO department that you'll work with while buying a REO property from them. Usually 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 discover as much as you can about what they know about the condition of the property and what their process is for accepting offers. Since banks usually 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 cancel 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 made your offer, you can expect the bank to make a counter offer. From there it will be up to you to decide whether to accept their counter, or submit another counter offer. Be aware, you'll be dealing with a process that usually involves a group of 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.