Buying a REO or foreclosure in North Kingstown
What's an REO?
REO stands for Real Estate Owned. These are houses which have been foreclosed upon which the bank or mortage company currently holds. This is different than a property up for foreclosure auction. When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees amassed during the foreclosure process. You must also be able to pay with cash in hand. And on top of all that, you'll accept the property totally as is. That may include standing liens and even current denizens that may require eviction.
A REO, conversely, is a much neater and attractive transaction. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The lender will attend to 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 typical disclosure requirements. For instance, in Calfornia, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to disclose any defects they are knowledgeable of.
Is an REO in North Kingstown a bargain?
It's occasionally assumed that any REO must be a good buy and an possibility for easy money. This isn't necessarily 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 typically anxious to sell it soon, they are also strongly motivated 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. It is possible to find REOs with money-making potential, and many people do very well buying foreclosures. Still there are also many REO's that are not good buys and may lose money.
All set to make an offer?
Most banks have a REO department that you'll work with when 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 discover as much as you can about what they know about the condition of the property and what their process is for taking offers. Since banks usually sell REO properties "as is", it may be in your best interest to include an inspection contingency in your offer that gives you time to check for unknown damage and withdraw 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 make a counter offer. Then it will be your choice whether to accept their counter, or submit another counter offer. Be aware, you'll be working with a process that generally involves several people at the bank, and they don't work evenings or weekends. It's typical for the process of offers and counter offers to take days or even weeks.