Buying a REO or foreclosure in Bronx
What's an REO?
REO stands for Real Estate Owned. These are properties that have been through foreclosure and are now held by the bank or mortgage company. This is unlike 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 accumulated during the foreclosure process. The buyer must also be ready to pay with cash in hand. And on top of all that, you'll get the property completely as is. That possibly will include current liens and even current occupants that need to be expelled.
A REO, on the other hand, is a more tidy and attractive option. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The lender will see to the elimination 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 typical disclosure requirements. In California, for example, banks are not required to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to disclose any defects of which they are knowledgeable.
Are REO's a bargain in Bronx?
It's commonly presume that any REO must be a good buy and an opportunity for easy money. This isn't always true. You have to be prudent about buying a REO if your intent is profit from the sell. While it's true that the bank is usually anxious to sell it fast, they are also strongly encouraged 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. The bargains with money making potential exist, and many people do very well buying foreclosures. But there are also many REO's that are not good buys and may lose money.
All set to make an offer?
Most mortgage companies have a REO department that you'll work with while buying a REO property from them. Typically 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 what they know regarding the condition of the property and what their process is for getting 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 presented your offer, you can expect the bank to make a counter offer. From there it will be your choice whether to accept their counter, or make another counter offer. Realize, you'll be dealing with a process that most likely involves a group of 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.