Buying a REO or foreclosure in Tampa

What is an REO?

REO stands for Real Estate Owned. These are homes which have completed the foreclosure process and are now held by the bank or mortgage company. 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 amassed during the foreclosure process. The buyer must also be prepared to pay with cash in hand. To top everything off, you'll get the property completely as is. That possibly will include prevailing liens and even current tenants that need to be evicted.

A REO, conversely, is a much cleaner and attractive deal. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The lender will take care of 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 typical disclosure requirements. For example, in California, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to reveal any defects they are aware of.

Are REO's a bargain in Tampa?

It is sometimes believed that any REO must be a good buy and an opportunity for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is to make money off of it. While it's true that the bank is often anxious to sell it fast, 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 not likely to turn a profit.

Prepared to make an offer?

Most banks have a REO department that you'll work with while buying a 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 discover as much as you can about what they know regarding the condition of the property and what their process is for receiving 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. After you've made your offer, you can expect the bank to respond with a counter offer. From there it will be your decision whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be dealing with a process that generally involves a group of 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.