Purchasing REO property or a foreclosure in Columbus?
Purchasing a bank-owned property is not something to be taken casually. If you have any questions about real estate in Columbus, Ohio, call me or send me an e-mail.
What's an REO?
"REO" is Real Estate Owned. These are homes which have completed the foreclosure process that the bank or mortgage company currently possesses. This is unlike real estate 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 amassed during the foreclosure process. You must also be able to pay with cash in hand. And on top of all that, you'll accept the property totally as is. That may consist of current liens and even current tenants that need to be kicked out.
A bank-owned property, on the contrary, is a much cleaner and attractive option. The REO property was unable to find a buyer during foreclosure auction. The bank now owns it. The bank will take care of the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing.
Do be aware that REOs may be exempt from typical disclosure requirements. For example, in North Carolina, it is optional for foreclosures to have a Property Disclosure Statement, a document that usually requires sellers to make known any defects they are knowledgeable of. By hiring Property Addicts, you can rest assured knowing all parties are fulfilling Ohio state disclosure requirements.
Are REO properties a bargain in Franklin County?
It is frequently presumed that any REO must be a good buy and an opportunity for easy money. This simply isn't true. You have to be very careful about buying a REO if your intent is to make money off of it. While it's true that the bank is often eager to sell it soon, they are also motivated to get as much as they can for it.
Look carefully at the listing and sales prices of comparable homes 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. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. However there are also many REOs that are not good buys and may lose money.
Prepared to make an offer?
Most mortgage companies have a department dedicated to REO that you'll work with when buying REO property from them. To get their properties advertised on the local MLS, the lender will typically hire a listing agent.
Before 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 receiving 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 retract the offer if you find it. If, as a buyer, you can provide documentation proving your ability to secure financing, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This holds for any type of real estate offer.)
After you've made your offer, you can expect the bank to respond with a counter offer. At this point it will be your choice whether to accept their counter, or make another counter offer. Be aware, you'll be dealing with a process that probably involves a group of people at the bank, and they don't work evenings or weekends. It's not unusual for there to be days or even weeks of going back and forth.
Look carefully at the listing and sales prices of comparable homes 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. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. However there are also many REOs that are not good buys and may lose money.
