Fullerton, California homes for sale

What is an REO?

There are plenty of great deals to be had in today's real estate market, and savvy buyers like to jump on them when they can. While some buyers look into short sale properties, others consider REOs. While short sale properties remain in the owner's possession and merely need an approval from the bank to proceed, REO properties are bank-owned. However, not all short sales and not all REOs are great deals, so caution is recommended.

Here is some more information to answer the question, "What is an REO?"

The acronym "REO" stands for Real Estate Owned, and it defines properties that banks or mortgage companies own following failed foreclosure auctions. Many foreclosure auctions fail because the asking price is too high or because the bidder must have a cashier's check in hand; in addition, bidders may choose not to risk the "as-is" conditions. REO properties are often in much better shape than when they went to foreclosure auction: once banks know they are stuck with the properties, they work to improve them and often remove tenants who might cause further damages. They usually make repairs and clean up the property.

What is an REO and What Can an REO Buyer Expect?

At times, REO buyers invest time and effort into buying a property, only to walk away empty handed. The process of buying bank-owned properties is sometimes exasperating, but the buyers who do end up with a deal often find the whole process worth it. They get a home or property for less than what they would have normally paid had it not been an REO.

Clearly, REO buyers can expect a fair bit of work. Banks will often counter-offer and place certain terms on the sale, and there is often a lot of paperwork involved. For example, buyers can expect to file an inspection contingency that allows them to get out of the sale if they find unexpected damages, and those working with real estate agents must have disclosure statements on hand. Before making an offer, the potential buyer should supply the real estate agent with pre-qualification paperwork like a pre-approval letter from a bank as well as a buyer biography. The better the buyer looks on paper, the more likely the bank is to accept the offer without any further proceedings. A real estate agent experienced in REO sales can help the REO buyer with every step of these frequently complex proceedings.

Pros of Buying an REO

After a foreclosure auction fails and a mortgage loan is eviscerated, the bank often cleans up the property and removes any tenants, and most or all liens are removed. Basically, the bank does the work that people buying foreclosure properties at auction would have to do by themselves. The bank then relists the property and gives potential buyers a title insurance policy as well as the chance to inspect the property thoroughly. While it is extremely unlikely a bank will try to get rid of a property at the lowest asking price possible, it is still possible to find REO properties thousands of dollars lower than comparable properties, if you do your homework. And there is hope because many successful buyers are first-time REO buyers who began with the very same question: "What is an REO?"

Cons of Buying an REO

Not all REOs are great deals. Some banks will hike up the price after doing all the work to make the property presentable. Savvy buyers should check comparable home prices, consider additional costs they may incur and then decide if the property is worth it. Also, banks often have an entire team of specialists dedicated to selling their REO and foreclosure properties. They will likely counter any offer a potential buyer makes, making the buying process somewhat tedious and very competitive. Also, despite any repairs the bank makes on the property, it will likely still list the property "as-is." That means that interested parties can inspect the property all they want, but the bank is unlikely to make any additional repairs. Finally, most banks will not finance REO properties, meaning buyers are responsible for coming up with funds to buy completely on their own.

If you are thinking about buying or selling a home, give us a call at (714) 726-3166 or send us an email to explore your options and to find out when is the best time for you to make a move.

Contact Information

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Carol and Jim
Preferred Home Brokers
3230 E Imperial Hwy, Ste 125
Brea CA 92821

Carol & Jim Chamberlain 714-726-3166 or 714-726-3144                  "Yes, We Can Be In Two Places At Once!"                                              BRE Lic Numbers: 00912962, 01015143