BUYING FORECLOSURES/REO'S

Buying a REO or foreclosure in Oklahoma City

What's an REO?

REO's or Real Estate Owned are houses which have been foreclosed upon which the bank or mortage company currently holds. This differs from 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 added during the foreclosure process. You must also be willing to pay with cash in hand. And on top of all that, you'll accept the property totally as is. That might comprise current liens and even current denizens that need to be kicked out.

A REO, by contrast, is a much neater and attractive deal. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The bank will attend to 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. Do be aware that REOs may be exempt from typical disclosure requirements. For example, in California, banks are not required to give a Transfer Disclosure Statement, a document that usually requires sellers to make known any defects of which they are aware.

Are REO's a bargain in Oklahoma City?

It's sometimes believed that any REO must be a good buy and an opportunity for easy money. This isn't necessarily true. You have to be cautious about buying a REO if your intent is profit from the sell. While it's true that the bank is typically anxious to sell it soon, they are also strongly interested 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 not be money makers.

All set to make an offer?

Most banks 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. Prior to 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 taking offers. Since banks typically sell REO properties "as is", you may want 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.

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 counter offer. From there it will be your decision whether to accept their counter, or make another counter offer. Understand, you'll be contending with a process that usually involves multiple 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.

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