Making an offer on REO property or a foreclosure in Zionsville, Carmel, Indianapolis, Brownsburg or Avon?
Purchasing a bank-owned property is not something to be taken casually.
What's an REO?
"REO" or Real Estate Owned are properties which have gone through foreclosure and are currently held by the bank or mortgage company. This is not the same as 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. The buyer must also be prepared to pay with cash in hand. To top everything off, you'll get the property 100% as is. That possibly will include prevailing liens and even current denizens that need to be removed.
A bank-owned property, by contrast, is a more tidy and attractive transaction. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The bank will take care of the removal 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 normal disclosure requirements. For example, in Texas, it is optional for foreclosures to have a Property Disclosure Statement, a document that ordinarily requires sellers to disclose any defects they are informed of. By hiring Alexander Realty Group 1, you can rest assured knowing all parties are fulfilling Indiana state disclosure requirements.
Are REO properties a bargain in Zionsville,Indianapolis, Brownsburg, Carmel, Avon and Fishers?
It is occasionally presumed that any REO must be a bargain and an opportunity for easy money. This simply 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 typically eager to offload it promptly, they are also motivated to get as much as they can for it.
Look closely at the listing and sales prices of comparable properties in the neighborhood when making an offer on an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in. The bargains with money making potential exist, 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.
Prepared to make an offer?
Most banks have a department dedicated to REO that you'll work with when buying REO property from them. Normally 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 learn as much as you can about what they know regarding the condition of the property and what their process is for accepting offers. Since banks usually 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 unseen damage and terminate the offer if you find it. If, as a buyer, you can provide documentation demonstrating your ability to secure financing, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This holds for any real estate offer.)
After you've submitted your offer, it's customary for the bank to make a counter offer. From there it will be up to you to decide whether to accept their counter, or make another counter offer. Understand, you'll be working with a process that probably involves a group of people at the bank, and they don't work evenings or weekends. It's not uncommon for there to be days or even weeks of going back and forth.
Look closely at the listing and sales prices of comparable properties in the neighborhood when making an offer on an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in. The bargains with money making potential exist, 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.
