Buying a REO or foreclosure in Orlando
What is an REO?
REO's or Real Estate Owned are properties which have been foreclosed upon and are presently possessed by the bank or mortgage company. 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. You must also be able to pay with cash in hand. And on top of all that, you'll get the property totally as is. That possibly may comprise prevailing liens and even current denizens that may require eviction.
A REO, by contrast, is a much neater and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank 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. Note that REOs may be exempt from normal disclosure requirements. For example, in California, banks do not have to give a Transfer Disclosure Statement, a document that usually requires sellers to tell you about any defects they are knowledgeable of.
Are REO's a bargain in Orlando?
It's sometimes though that any REO must be a bargain and an possibility for easy money. This isn't necessarily true. You have to be very careful about buying a REO if your intent is make money. While it's true that the bank is usually anxious to sell it promptly, they are also strongly motivated 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. It is possible to find REOs with money-making potential, and many people do very well buying 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 in 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. Before making your offer, you'll want to contact either the listing agent or REO department at the bank and find out as much as you can about what they know concerning the condition of the property and what their process is for getting offers. Since banks most commonly 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 unknown damage and cancel 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 presented your offer, you can expect the bank to respond with a counter offer. Then it will be your decision whether to accept their counter, or offer a counter to the counter offer. Realize, 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 uncommon for the process of offers and counter offers to take days or even weeks.