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Buying REO property or a foreclosure in West Covina?
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Purchasing a bank-owned property is not something to be taken lightly. Should you have questions about real estate in West Covina, California, call me or send me an e-mail. |
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What is an REO?"REO" is short for Real Estate Owned. These are houses which have completed the foreclosure process that the bank or mortgage company currently possesses. 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 amassed during the foreclosure process. You must also be able to pay with cash in hand. To top everything off, you'll accept the property 100% as is. That possibly may consist of standing liens and even current tenants that need to be thrown out.
A bank-owned property, by contrast, is a much neater and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. The bank now 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 Texas, it is optional for foreclosures to have a Property Disclosure Statement, a document that usually requires sellers to reveal any defects they are informed of. By hiring MarThel Real Estate you can rest assured knowing all parties are fulfilling California state disclosure requirements.
Are REO properties a bargain in Los Angeles County?It's frequently believed that any foreclosure must be a steal and an opportunity for guaranteed profit. This isn't necessarily the case. You have to be cautious about buying a REO if your intent is profit from the sale. Even though the bank is typically anxious to offload it soon, they are also looking to get as much as they can for it.
 Look carefully at the listing and sales prices of competing properties in the neighborhood when considering the purchase of 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. Still there are also many REOs that are not good buys and may lose money.
Ready to make an offer?Most mortgage companies have staff dedicated to REO that you'll work with when buying 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 learn as much as you can about what they know regarding the condition of the property and what their process is for receiving 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 hidden damage and cancel the offer if you find it. As with making any offer on real estate, providing documentation proving your ability to secure financing may make your offer more attractive, such as a pre-approval letter from a lender.
Once you've presented your offer, you can expect the bank to counter offer. Then it will be your decision whether to accept their counter, or make another counter offer. Be aware, you'll be dealing 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 there to be days or even weeks of negotiating back and forth. MarThel Real Estate 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.
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