Interested in REO property or a foreclosure?

What is an REO?

"REO" or Real Estate Owned are houses which have been foreclosed upon that the bank or mortgage company presently holds. This is not the same as real estate 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 accumulated during the foreclosure process. You must also be willing to pay with cash in hand. And on top of all that, you'll accept the property totally as is. That might involve current liens and even current denizens that need to be evicted.

A bank-owned property, by contrast, is a much cleaner and attractive deal. The REO property was unable to find a buyer during foreclosure auction. Now the bank owns it. The bank will see 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.

You should be aware that REOs may be exempt from normal disclosure requirements. For example, in North Carolina, it is optional for foreclosures to have a Property Disclosure Statement, a document that normally requires sellers to disclose any defects they are aware of. By hiring an agent from Benchmark Realty, you can rest assured knowing all parties are fulfilling Tennessee state disclosure requirements.

Am I assured a low price when investing in a bank owned property in Brentwood?

It is frequently assumed that any REO must be a bargain and a possibility for guaranteed profit. 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 often eager to sell it promptly, they are also motivated to minimize any losses.

Look carefully at the listing and sales prices of similar homes 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. There are bargains with potential to make money, and many people do very well buying foreclosures. Still there are also many REOs that are not good buys and may not be money makers.

Ready to make an offer?

Most lenders have staff dedicated to REO that you'll work with in buying REO property from them. To get their properties advertised on the local MLS, the lender will typically use a listing agent.

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 their knowledge about the condition of the property and what their process is for accepting offers. Since banks almost always sell REO properties "as is", you may want 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, 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.

After you've submitted your offer, it's customary for the bank to respond with a counter offer. Then it will be your choice whether to accept their counter, or submit another counter offer. Your transaction might be final in one day, but that's rare. Since offers and counter offers usually give the other party a day or longer to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer.