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, we will investigate and discover if any disclosure, current or past, are available and hold all parties 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 losses.
Rock Springs Realty has experience to share with foreclosures and bank owned properties. We must perform extensive due diligence to determine current and ARV (after renovated value) of the home will allow sufficient profit to make this acquisition viable. What extend and expense are necessary in regard to repairs or upgrades to prepare the house for resale, or moving in. Is it possible to find REO's with money-making potential? Absolutely! Many experienced investors or flippers can do very well buying and selling foreclosures. But, in most cases they are jewels in the rough and you must have the risk tolerance, financial resources, and knowledge to work with contractors to get the home back into move-in or marketable condition.
How to make an offer
Most mortgage companies have a department dedicated to REO's that we'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 system.
Before making your offer, we'll want to contact either the listing agent or REO department at the bank to find out as much as we can about what knowledge the bank has regarding the condition of the property and their process is for making & receiving offers. Since banks typically sell REO properties "As-Is, Where-Is," it's often prudent to include an inspection contingency in the offer that provides an inspection period to check for unknown damage and cancel the offer if you find it unacceptable. Any offer on an REO must include a proof of funds letter if paying in cash, or a full pre-approval letter from a lender if using financing. There can be other requirements as well which we can discuss personally.
Once you've submitted your offer, it's likely the bank will make a counteroffer as their job is to obtain as much money as possible from the liquidation of the property. Then it will be your decision whether to accept their counter, submit a counteroffer, or reject the count and walk away. 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), this process will most likely take days or weeks to determine a final outcome.
Be cautious, perform extensive research, do your homework & due diligence, and make money buying REO's can be a positive experience!
If you have any questions or would like to set up a personal meeting to discuss your investment objective, please feel free to contact me directly. Joe Bornstein, Rock Springs Realty, 877-333-2811 or joe@rockspringsrealty.com
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