Buying a REO or foreclosure in North Kingstown
What is an REO?
REO's or Real Estate Owned are houses which have been through foreclosure which the bank or mortage company currently owns. This is different than a property 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 added during the foreclosure process. The buyer must also be prepared to pay with cash in hand. To top everything off, you'll get the property one-hundred percent as is. That could include prevailing liens and even current occupants that need to be removed.
A REO, conversely, is a much cleaner and attractive option. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The lender will attend to the removal of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing. Take notice that REOs may be exempt from normal disclosure requirements. For example, in California, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to reveal any defects they are informed of.
Are REO's a bargain in North Kingstown?
It's occasionally assumed that any REO must be a bargain and an possibility for easy money. This usually isn't true. You have to be cautious about buying a REO if your intent is make a profit. While it's true that the bank is usually anxious to sell it quickly, they are also strongly interested to get as much as they can for it. When pondering 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. It is possible to find REOs with money-making potential, and many people do very well buying foreclosures. However there are also many REO's that are not good buys and may not be money makers.
All set to make an offer?
Most banks 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. Before making your offer, you'll want to contact either the listing agent or REO department at the bank and learn as much as you can about what they know about the condition of the property and what their process is for getting offers. Since banks almost always sell REO properties "as is", you'll want to be sure and include an inspection contingency in your offer that gives you time to check for unseen damage and cancel 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 presented your offer, you can expect the bank to counter offer. From there it will be your choice whether to accept their counter, or make another counter offer. Be aware, you'll be working with a process that usually involves a group of 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.