Buying REO property or a foreclosure in Santa Barbara?
Savvy consumers will turn to a seasoned pro when considering a foreclosed property.
What is an REO?
"REO" or Real Estate Owned are properties which have been foreclosed upon that the bank or mortgage company now possesses. This is different than real estate 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 amassed during the foreclosure process. The buyer must also be willing to pay with cash in hand. Finally, you'll get the property 100% as is. That may involve current liens and even current occupants that need to be thrown out.
A bank-owned property, by contrast, is a more tidy and attractive proposition. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The lender will attend to the elimination of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing.
You should be aware that REOs may be exempt from normal 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 informed.
By hiring Century 21 Butler Realty, Inc, you can rest assured knowing all parties are fulfilling California state disclosure requirements.
Am I guaranteed a low price when investing in an REO property in Santa Barbara?
It's frequently thought that any foreclosure must be a good buy and a possibility for guaranteed profit. This simply isn't 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 anxious to offload it soon, they are also looking to get as much as they can for it.
When contemplating what to pay for 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.
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 lose money.
Time to make an offer?
Most mortgage companies have a department 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 often hire a listing agent.
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 regarding the condition of the property and what their process is for accepting offers. Since banks typically 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 showing 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 type of real estate offer.)
Once you've presented your offer, you can expect the bank to respond with a counter offer. From there it will be your choice whether to accept their counter, or offer a counter to the counter offer.
Understand, you'll be dealing with a process that usually involves a group of people at the bank, and they don't work evenings or weekends. It's typical for there to be days or even weeks of going back and forth.