Buying Foreclosures

Considering buying or making an offer on an REO foreclosure? 

Foreclosed and bank owned property purchases can be extremely complicated. These types of transactions should require the assistance of an experienced real estate professional or attorney.

What's an REO?

"REO" stands for Real Estate Owned. These are houses which have completed the foreclosure process that the bank or mortgage company currently holds. This is different than a property up for foreclosure auction. Rock Springs Realty has years of experience with foreclosures and bank-owned properties throughout the Central Florida market.

If you buy a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees added during the foreclosure process. The buyer must also be prepared to pay with cash in hand. And on top of all that, you'll get the property totally As-Is, Where-Is. That might consist of prevailing liens, outstanding HOA fees, and even current occupants that may require removal.

A bank-owned property, on the contrary, is a more tidy and attractive option. The REO property didn't find a buyer during the foreclosure process. Now the bank owns it. The bank will attend to 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.

You should be aware that REOs may be exempt from standard disclosure requirements. For example, in North Carolina, it is optional for foreclosures to have a Property Disclosure Statement, a document that normally requires sellers to disclose any defects of which they are knowledgeable. By hiring Rock Springs Realty, you can rest assured knowing all parties will be held accountable for fulfilling Florida state disclosure requirements.

Are REO properties in Central Florida a bargain?

It's frequently assumed that any foreclosure must be a good deal and a chance for easy money. This simply isn't true. You have to be prudent about buying an REO if your intent is to make money. While it's true that the bank is typically anxious to offload it quickly, they are also motivated to minimize any losses.

Rock Springs Realty has experience to share with foreclosures and bank owned properties. Look carefully at the listing and sales prices of competing homes in the neighborhood when considering the purchase of an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in. It is possible to find REO's with money-making potential, and many people do very well buying and selling foreclosures. But, there are also many REO's that are not good buys and may not be money makers.

How to make an offer

Most mortgage companies have a department dedicated to REO's that you'll work with while buying REO properties 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 find out 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 typically sell REO properties "As-Is, Where-Is," it's often prudent to include an inspection contingency in your offer that gives you time to check for unknown damage and cancel 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 or a proof of funds letter for an all cash offer.

Once you've submitted your offer, it's customary for the bank to counter offer. Then it will be your decision whether to accept their counter, or submit another counter offer. Your deal might be settled in a single day, but that's rare. Since offers and counter offers usually give the other party a day or longer to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer. 

Be cautious, do your homework & due diligence, and making money buying REO's can be a positive experience!

If you should need assistance or have any additional questions, please contact Joe Bornstein, Rock Springs Realty, 877-333-2811 or