Buying a REO or foreclosure in Winston-Salem
What is an REO?
REO means Real Estate Owned. These are homes that have been foreclosed upon which the bank or mortage company now owns. This is unlike 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. The buyer must also be able to pay with cash in hand. And on top of all that, you'll get the property totally as is. That might consist of current liens and even current denizens that need to be expelled.
A REO, on the contrary, is a more tidy and attractive deal. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The lender will see to the elimination of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing. Note that REOs may be exempt from typical disclosure requirements. For example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to tell you about any defects of which they are informed.
Is an REO in Winston-Salem a bargain?
It is occasionally assumed that any REO must be a bargain and an opportunity for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is to make money off of it. While it's true that the bank is often anxious to sell it quickly, they are also strongly interested to get as much as they can for it. When contemplating 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 foreclosures. Still there are also many REO's that are not good buys and may not be money makers.
Ready to make an offer?
Most mortgage companies have a REO department that you'll work with while buying a REO property from them. Typically 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 discover as much as you can about what they know regarding the condition of the property and what their process is for taking offers. Since banks usually sell REO properties "as is", it may be in your best interest to include an inspection contingency in your offer that gives you time to check for hidden damage and withdraw 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. After you've submitted your offer, you can expect the bank to respond with a counter offer. At this point it will be your decision whether to accept their counter, or offer a counter to the counter offer. Realize, you'll be dealing with a process that generally involves several people at the bank, and they don't work evenings or weekends. It's not unusual for the process of offers and counter offers to take days or even weeks.