Buying a REO or foreclosure in Alhambra
What's an REO?
REO's or Real Estate Owned are houses which have completed the foreclosure process which the bank or mortage company now holds. This is different than 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 accumulated during the foreclosure process. You must also be able to pay with cash in hand. And on top of all that, you'll receive the property completely as is. That might include prevailing liens and even current residents that may require removal.
A REO, by contrast, is a much cleaner and attractive transaction. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The lender will take care of 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. Do be aware that REOs may be exempt from standard disclosure requirements. For example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that ordinarily requires sellers to make known any defects they are informed of.
Are REO's a bargain in Alhambra?
It's sometimes assumed that any REO must be a good deal and an possibility for easy money. This isn't always true. You have to be cautious 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 encouraged to get as much as they can for it. When pondering 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. But there are also many REO's that are not good buys and may lose money.
Prepared to make an offer?
Most lenders have a REO department that you'll work with in buying a REO property from them. Normally 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 regarding the condition of the property and what their process is for accepting offers. Since banks usually 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 unseen damage and cancel 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. After you've made your offer, you can expect the bank to make a counter offer. At this point it will be your decision whether to accept their counter, or make another counter offer. Understand, you'll be contending with a process that most likely involves a group of 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.