Buying a REO or foreclosure in Annapolis
What is an REO?
REO stands for Real Estate Owned. These are properties that have completed the foreclosure process and are now owned 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. The buyer must also be willing to pay with cash in hand. To top everything off, you'll get the property totally as is. That could consist of current liens and even current denizens that may require removal.
A REO, on the other hand, is a more tidy and attractive transaction. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The lender will see 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 California, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to make known any defects they are informed of.
Is an REO in Annapolis a bargain?
It's frequently though that any REO must be a good buy and an possibility for easy money. This usually isn't true. You have to be cautious about buying a REO if your intent is profit from the sell. While it's true that the bank is usually anxious to sell it quickly, they are also strongly interested 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. The bargains with money making potential exist, and many people do very well buying and selling foreclosures. But there are also many REO's that are not good buys and not likely to turn a profit.
Prepared to make an offer?
Most mortgage companies have a REO department that you'll work with when buying a 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 discover as much as you can about what they know about the condition of the property and what their process is for taking offers. Since banks usually sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unseen damage and retract 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. Once you've made your offer, you can expect the bank to make a counter offer. Then it will be your decision whether to accept their counter, or make another counter offer. Realize, you'll be contending with a process that usually involves a group of people at the bank, and they don't work evenings or weekends. It's quite common for the process of offers and counter offers to take days or even weeks.