Buying a REO or foreclosure in Tampa
What is an REO?
REO means Real Estate Owned. These are houses which have completed the foreclosure process and are currently possessed by the bank or mortgage company. This is not the same as 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 ready to pay with cash in hand. And on top of all that, you'll receive the property one-hundred percent as is. That possibly may include existing liens and even current tenants that need to be kicked out.
A REO, by contrast, is a much neater and attractive deal. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The lender will deal with the elimination of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing. Note that REOs may be exempt from normal disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that ordinarily requires sellers to disclose any defects of which they are aware.
Are REO's a bargain in Tampa?
It's frequently assumed that any REO must be a good buy and an opportunity for easy money. This usually isn't true. You have to be cautious about buying a REO if your intent is make money. While it's true that the bank is often anxious to sell it promptly, they are also strongly encouraged to get as much as they can for it. When considering 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. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. Still there are also many REO's that are not good buys and may lose money.
Ready 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 find out as much as you can about what they know concerning the condition of the property and what their process is for accepting offers. Since banks most commonly 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 retract 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. Once you've made your offer, you can expect 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 working with a process that most likely involves multiple 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.