Buying a REO or foreclosure in Annapolis
What's an REO?
REO's or Real Estate Owned are houses which have completed the foreclosure process which the bank or mortage company currently possesses. This is not the same as 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 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 entirely as is. That possibly may include current liens and even current denizens that need to be evicted.
A REO, by contrast, is a much cleaner and attractive proposition. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The lender will take care of the removal of tax liens, evict occupants if needed and generally arrange 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. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to disclose any defects of which they are informed.
Is an REO in Annapolis a bargain?
It's frequently presume that any REO must be a bargain and an chance for easy money. This just isn't true. You have to be very careful about buying a REO if your intent is make money. While it's true that the bank is usually anxious to sell it soon, they are also strongly encouraged 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. There are bargains with potential to make money, and many people do very well buying foreclosures. Still there are also many REO's that are not good buys and not likely to turn a profit.
All set to make an offer?
Most banks 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. 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 about the condition of the property and what their process is for getting offers. Since banks typically sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unknown damage and withdraw 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. Once you've made your offer, you can expect the bank to counter offer. At this point it will be up to you to decide whether to accept their counter, or submit another counter offer. Be aware, you'll be contending with a process that probably involves multiple people at the bank, and they don't work evenings or weekends. It's typical for the process of offers and counter offers to take days or even weeks.