Buying a REO or Foreclosure in Tulsa
What is an REO?
REO is Real Estate Owned. These are homes that have been foreclosed upon which the bank or mortage company presently holds. This differs from real estate 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 added during the foreclosure process. The buyer must also be ready to pay with cash in hand. Finally, you’ll receive the property entirely as is. That could include existing liens and even current tenants that need to be thrown out.
A REO, on the other hand, is a more tidy and attractive deal. The REO property didn’t find a buyer during foreclosure auction. Now the lender owns it. The lender will deal with 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 typical disclosure requirements. For example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to make known any defects they are aware of.
Are REO’s a bargain in Tulsa?
It is occasionally presume that any REO must be a good deal and an opportunity for easy money. This simply isn’t true. You have to be prudent about buying a REO if your intent is to make money off of it. While it’s true that the bank is typically anxious to sell it soon, 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 and selling foreclosures. Still there are also many REO’s that are not good buys and may lose money.
Time to make an offer?
Most lenders have a REO department that you’ll work with in buying a REO property from them. Commonly 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 almost always sell REO properties “as is”, you may want to include an inspection contingency in your offer that gives you time to check for unknown damage and terminate 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. After you’ve submitted your offer, you can expect the bank to make a counter offer. At this point it will be up to you to decide whether to accept their counter, or make another counter offer. Understand, you’ll be dealing with a process that usually 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.