Buying Foreclosures

Purchasing REO property or a foreclosure in The Valley?

Smart consumers will turn to a seasoned pro when considering a foreclosed property. If you have any questions about real estate in The Valley, Arizona, call me or send me an e-mail.

What is an REO?

"REO" or Real Estate Owned are houses which have been foreclosed upon that the bank or mortgage company now owns. 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. The buyer must also be ready to pay with cash in hand. Finally, you'll accept the property totally as is. That possibly may include existing liens and even current denizens that may require eviction.

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A bank-owned property, conversely, is a much cleaner and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The lender will handle 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.

Take notice that REOs may be exempt from standard disclosure requirements. For instance, in California, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to reveal any defects they are informed of. By hiring Heritage Success Realty, you can rest assured knowing all parties are fulfilling Arizona state disclosure requirements.

Is REO property in The Valley a bargain?

It's sometimes assumed that any foreclosure must be a good deal and an opportunity for guaranteed profit. This isn't necessarily true. You have to be cautious about buying a REO if your intent is to make money off of it. Even though the bank is usually eager to offload it promptly, they are also motivated to minimize any losses.

Look closely at the listing and sales prices of competing homes in the neighborhood when considering the purchase of an REO. And factor in any repairs or remodeling 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. Still there are also many REOs that are not good buys and may lose money.

Prepared to make an offer?

Most mortgage companies have staff dedicated to REO that you'll work with when buying REO property from them. To get their properties advertised on the local MLS, the lender will usually hire a listing agent.

Prior to 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 their knowledge regarding the condition of the property and what their process is for getting offers. Since banks most commonly 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 cancel 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 holds for any real estate offer.)

After you've made your offer, it's customary for the bank to counter offer. At this point it will be your decision whether to accept their counter, or make another counter offer. Understand, you'll be dealing with a process that probably involves multiple people at the bank, and they don't work evenings or weekends. It's not unusual for the process of offers and counter offers to take days or even weeks.