Making an offer on REO property or a foreclosure in Louisville?
Just as with any home purchase, your smartest move is to hire a professional real estate agent.
What is an REO?
"REO" or Real Estate Owned are houses which have been foreclosed upon and are currently owned by the bank or mortgage company. 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 added during the foreclosure process. You must also be able to pay with cash in hand. Finally, you'll get the property entirely as is. That possibly could comprise of existing liens and even current residents that may require eviction.
A bank-owned property, by contrast, is a much neater and attractive deal. The REO property was unable to find a buyer during foreclosure auction. Now the bank owns it. The bank will attend to 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.
Note 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 normally requires sellers to disclose any defects of which they are aware. By hiring Louisville Metro Realty, you can rest assured knowing all parties are fulfilling Kentucky state disclosure requirements.
Are REO properties a bargain in Jefferson County?
It's sometimes believed that any foreclosure must be a good deal and a chance for easy money. This simply isn't true. You have to be very careful about buying a repossession if your intent is to make money off of it. While it's true that the bank is often eager to offload it promptly, they are also motivated to minimize any losses.
Look closely at the listing and sales prices of similar properties in the neighborhood when making an offer on 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 and selling foreclosures. But there are also many REOs that are not good buys and may lose money.
Ready to make an offer?
Most banks 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.
Prior to making your offer, you'll want to contact either the listing agent or REO department at the bank and learn as much as you can about their knowledge concerning the condition of the property and what their process is for accepting 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 unknown damage and retract the offer if you find it. As with making any offer on real estate, providing documentation proving your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender.
After you've made your offer, it's customary for the bank to counter offer. Then it will be up to you to decide whether to accept their counter, or submit another counter offer. Your transaction could be final in one day, but that's rare. 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. Louisville Metro Realty 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.
Look closely at the listing and sales prices of similar properties in the neighborhood when making an offer on 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 and selling foreclosures. But there are also many REOs that are not good buys and may lose money.
