Buying a REO or foreclosure in Columbus
What is an REO?
REO is short for Real Estate Owned. These are houses which have gone through foreclosure and are presently held by the bank or mortgage company. 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 accrued during the foreclosure process. The buyer must also be ready to pay with cash in hand. And on top of all that, you'll accept the property completely as is. That possibly could comprise current liens and even current tenants that need to be thrown out.
A REO, by contrast, is a much neater and attractive deal. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The bank will deal with the elimination of tax liens, evict occupants if needed and generally organize 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 California, banks do not have to give a Transfer Disclosure Statement, a document that usually requires sellers to make known any defects of which they are aware.
Are REO's a bargain in Columbus?
It is sometimes believed that any REO must be a steal and an possibility for easy money. This isn't always true. You have to be cautious about buying a REO if your intent is to make money off of it. While it's true that the bank is usually anxious to sell it fast, 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 flipping foreclosures. But there are also many REO's that are not good buys and may not be money makers.
All set to make an offer?
Most mortgage companies have a REO department that you'll work with while buying a REO property from them. Commonly the REO department will use a listing agent to get their REO properties listed on the local MLS. Prior to 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 accepting offers. Since banks almost always sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unseen damage and retract 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 make a counter offer. From there it will be up to you to decide whether to accept their counter, or make another counter offer. Realize, you'll be dealing with a process that probably involves multiple people at the bank, and they don't work evenings or weekends. It's quite common for the process of offers and counter offers to take days or even weeks.