Buying REO property or a foreclosure in Northern Virginia?
Smart consumers will turn to a seasoned pro when considering the purchase of a foreclosed property. Should you have questions regarding real estate in Northern Virginia, call me
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What is an REO?
"REO" or Real Estate Owned are properties which have completed the foreclosure process that the bank or mortgage company presently 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 accrued during the foreclosure process. The buyer must also be willing to pay with cash in hand. And on top of all that, you'll get the property totally as is. That possibly will involve current liens and even current occupants that may require eviction.
A bank-owned property, 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 bank will handle the removal of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing.
Do be aware that REOs may be exempt from typical disclosure requirements. For example, in Nevada, it is optional for foreclosures to have a Property Disclosure Statement, a document that normally requires sellers to reveal any defects of which they are knowledgeable. By hiring Avenue Realty Group, you can rest assured knowing all parties are fulfilling Virginia state disclosure requirements.
Is REO property in Northern Virginia a bargain?
It is commonly thought that any foreclosure must be a bargain and a chance for guaranteed profit. This isn't necessarily the case. You have to be cautious about buying a repossession if your intent is to make money off of it. Even though the bank is often anxious to offload it quickly, they are also looking to get as much as they can for it.
Look carefully 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 upgrades 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 buying and selling foreclosures. Still, there are also many REOs that are not good buys and may lose money.
Ready to make an offer?
Most lenders have staff dedicated to REO that you'll work with when buying REO property from them. To get their properties advertised on the local MLS, the lender will often hire a listing agent.
Prior to 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 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 terminate the offer if you find it. As with making any offer on real estate, you'll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender.
After you've presented your offer, it's customary for the bank to respond with a counter offer. At this point it will be your choice whether to accept their counter, or submit another counter offer. Be aware, you'll be dealing with a process that usually involves several 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.