Making an offer on REO property or a foreclosure in Tallahassee?
Just as with any home purchase, your smartest move is to hire a professional real estate agent. If you have any questions regarding real estate in Tallahassee, Florida, call me or send me an e-mail.
What is an REO?
"REO" or Real Estate Owned are homes which have been foreclosed upon and are presently held by the bank or mortgage company. 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. You must also be ready to pay with cash in hand. Finally, you'll receive the property totally as is. That could involve existing liens and even current residents that need to be put out.
A bank-owned property, by contrast, is a much cleaner and attractive proposition. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The bank will deal with 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.
Note that REOs may be exempt from standard disclosure requirements. For instance, in California, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to reveal any defects of which they are knowledgeable. By hiring Cassandra G. Harbin, CRS, GRI, SFR, Realtor®, you can rest assured knowing all parties are fulfilling Florida state disclosure requirements.
Am I assured a low price when buying a bank owned property in Tallahassee?
It's sometimes assumed that any REO must be a bargain and a possibility for guaranteed profit. This simply isn't true. You have to be prudent about buying a REO if your intent is make money. Even though the bank is typically anxious to sell it promptly, they are also motivated to get as much as they can for it.
When pondering the value of a foreclosure, 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. There are bargains with potential to make money, and many people do very well flipping foreclosures. Still there are also many REOs that are not good buys and not likely to turn a profit.
All set to make an offer?
Most mortgage companies have a department dedicated to REO that you'll work with in buying 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 find out as much as you can about their knowledge regarding 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 unseen damage and terminate the offer if you find it. If, as a buyer, you can provide documentation demonstrating your ability to pay, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This goes for any type of real estate offer.)
Once you've submitted your offer, it's customary for the bank to respond with a counter offer. Then it will be your choice whether to accept their counter, or submit another counter offer. Your deal could be settled in a single day, but that's rare. 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. I am used to working around the schedules of this type of seller and will do everything possible to ensure there are no undue delays.
When pondering the value of a foreclosure, 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. There are bargains with potential to make money, and many people do very well flipping foreclosures. Still there are also many REOs that are not good buys and not likely to turn a profit.
