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Buying Foreclosures/REO's
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Just as with any home purchase, your smartest move is to hire a professional real estate agent. Should you have questions regarding real estate in Austin, Texas, call us or send us an e-mail. |
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What's an REO?"REO" stands for Real Estate Owned. These are properties which have completed the foreclosure process and are now held by the bank or mortgage company. This is unlike 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 added during the foreclosure process. The buyer must also be willing to pay with cash in hand. To top everything off, you'll accept the property completely as is. That may consist of standing liens and even current denizens that may require eviction.
A bank-owned property, on the contrary, is a much cleaner and attractive option. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The lender will attend to the elimination of tax liens, evict occupants if needed and generally arrange 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 California, banks do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to make known any defects of which they are knowledgeable. By hiring Friedman Real Estate, Inc., you can rest assured knowing all parties are fulfilling Texas state disclosure requirements.
Are REO properties a bargain in Austin?It is sometimes presumed that any foreclosure must be a steal and a possibility for easy money. This isn't necessarily true. You have to be very careful about buying a REO if your intent is make a profit. Even though the bank is usually anxious to offload it fast, they are also looking to get as much as they can for it.
 Look closely at the listing and sales prices of comparable properties in the neighborhood when considering the purchase of an REO. And factor in any repairs or remodeling necessary to prepare the house for resale or moving in. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. However there are also many REOs that are not good buys and not likely to turn a profit.
Time to make an offer?
Most mortgage companies have a department dedicated to REO that you'll work with in buying REO property from them. Typically 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 learn as much as you can about their knowledge regarding the condition of the property and what their process is for getting 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 unknown damage and cancel the offer if you find it. As with making any offer on real estate, your offer may be more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender.
Once you've presented your offer, it's customary for the bank to respond with a counter offer. From there it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Be aware, you'll be working with a process that generally involves multiple people at the bank, and they don't work evenings or weekends. It's not uncommon for the process of offers and counter offers to take days or even weeks.
Want to buy a short sale?
Are short sales bargains?
From time to time, yes. Most people hear the term "short sale" and instinctively think of a seller that is in financial trouble and needs to sell their house quickly to avoid further financial problems. This is at times the case and can be an opportunity for a buyer to do well from another's misfortune. On the other hand, a lender may consider a short sale even if the seller is current with their mortgage, but property values have fallen. In these instances the "bargain" price may in fact be in line with current market values instead of below.
Are you ready to buy a short sale property?
- Always do your research before making any offers. Using an experienced real estate agent from Friedman Real Estate, Inc. to support your research of a property will help you make informed decisions. We can help learn to whom the property is titled, the amount owed to the lender, and whether or not a foreclosure notice has been filed. Locating this info can help you make a decision about how much to offer.
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Hire a real estate professional with short sale expertise. The real estate agents at Friedman Real Estate, Inc. can assist you in expediting the transaction and make certain you're protected. Don't allow inexperience to slow down the closing process. Put our experience and knowledge to work in your favor.
- Even with an experienced real estate agent and under the best of situations, buying a short sale property will probably take longer than a typical real estate transaction. Be informed that most short sales will not close in the customary 30 days or less. Remember that you're not only having to get approval from the seller, but the lender must also agree to the sale terms. It's not uncommon that your offer will be seen by a committee to approve which will add time - sometimes even 2 to 3 months.
- Home warranties, buyer credits and allowances, and closing cost concessions are normally not negotiable when buying a short sale. The lender will be selling the property "as is" which means the lender won't be paying for repairs. Make sure you reserve the right to have the property inspected for pests, HVAC, electrical, and other critical areas. At Friedman Real Estate, Inc., when we write an offer, we will be looking out for your interests first and foremost and will always suggest that you make your offer contingent upon the results of the inspections.
When it's time to buy, whether it is a short sale or a typical home sale, Friedman Real Estate, Inc. can help you. Use our experience and knowledge of real estate to feel confident you are getting a fair deal and are protected during the full matter.
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