Making an offer on REO property or a foreclosure in San Diego?

What is an REO?

"REO" means Real Estate Owned. These are homes which have been foreclosed upon and are now possessed by the bank or mortgage company. This is unlike a property 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 accumulated during the foreclosure process. The buyer must also be prepared to pay with cash in hand. Finally, you'll get the property entirely as is. That may include prevailing liens and even current occupants that may require expulsion.

A bank-owned property, conversely, is a much cleaner and attractive deal. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The bank will deal with the elimination of tax liens, evict occupants if needed and generally plan 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 Texas, it is optional for foreclosures to have a Property Disclosure Statement, a document that usually requires sellers to tell you about any defects of which they are aware. By hiring Rancho Buena Vista Real Estate, you can rest assured knowing all parties are fulfilling California state disclosure requirements.

Are REO properties a bargain in San Diego?

It is sometimes presumed that any foreclosure must be a bargain and a possibility for guaranteed profit. This simply isn't true. You have to be very careful about buying a REO if your intent is to make a profit. Even though the bank is usually eager to sell it quickly, they are also looking to get as much as they can for it.

Look closely at the listing and sales prices of competing properties in the neighborhood when considering the purchase of an REO. And factor in any repairs or remodeling necessary to prepare the house for resale or moving in. The bargains with money making potential exist, and many people do very well buying foreclosures. Still, 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 while buying 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 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 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, you'll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender.

After you've submitted your offer, it's customary for the bank to respond with a counter offer. From there it will be your choice whether to accept their counter, or make another counter offer. Your transaction might be settled in one day, but that's usually not the case. Since offers and counter offers usually allow a day or more for the other party to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer.