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Making an offer on REO property or a foreclosure in Austin?
Making an offer on a bank-owned property is not something to be taken casually.
What's an REO?
"REO" or Real Estate Owned are properties which have gone through foreclosure that the bank or mortgage company presently holds. This is unlike 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 accrued during the foreclosure process. The buyer must also be prepared to pay with cash in hand. To top everything off, you'll accept the property 100% as is. That may consist of current liens and even current residents that need to be expelled.
A bank-owned property, by contrast, is a more tidy and attractive proposition. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The lender will attend to the elimination of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing.
You should be aware that REOs may be exempt from standard disclosure requirements. For example, in North Carolina, it is optional for foreclosures to have a Property Disclosure Statement, a document that ordinarily requires sellers to tell you about any defects they are knowledgeable of. By hiring Insurance/Real Estate Advisors & Faciliators, LLC, you can rest assured knowing all parties are fulfilling Texas state disclosure requirements.
Am I guaranteed a bargain when buying an REO property in Austin?
It's sometimes believed that any REO must be a good buy and an opportunity for guaranteed profit. This isn't necessarily true. You have to be prudent about buying a repossession if your intent is make money. While it's true that the bank is usually eager to offload it soon, they are also motivated to minimize any losses.
When contemplating the value of a foreclosure, carefully analyze 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. It is possible to find REOs with money-making potential, and many people do very well buying and selling foreclosures. But there are also many REOs that are not good buys and may not be money makers.
Prepared to make an offer?
Most mortgage companies have staff dedicated to REO that you'll work with in buying REO property from them. To get their properties advertised on the local MLS, the lender will often use 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 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 unknown damage and withdraw the offer if you find it. As with making any offer on real estate, your offer may be more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender.
Once you've presented your offer, it's customary for the bank to respond with a counter offer. At this point it will be up to you to decide whether to accept their counter, or make another counter offer. Your deal could be final in a single day, but that's usually not the case. Since offers and counter offers usually give the other party a day or longer to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer. Insurance/Real Estate Advisors & Faciliators, LLC is are used to working around the schedules of this type of seller and will do everything possible to ensure there are no unnecessary delays.