Buying a REO or foreclosure in Tampa

What is an REO?

REO stands for Real Estate Owned. These are houses that have been foreclosed upon which the bank or mortage company now possesses. 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 accrued during the foreclosure process. The buyer must also be able to pay with cash in hand. To top everything off, you'll get the property totally as is. That might consist of existing liens and even current denizens that may require removal.

A REO, by contrast, is a much neater and attractive transaction. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The bank will take care of the removal of tax liens, evict occupants if needed and generally organize 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 do not have to give a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects of which they are informed.

Are REO's a bargain in Tampa?

It's frequently though that any REO must be a steal and an possibility for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is make a profit. While it's true that the bank is often anxious to sell it soon, they are also strongly motivated 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. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. However there are also many REO's that are not good buys and not likely to turn a profit.

All set to make an offer?

Most mortgage companies have a REO department that you'll work with in buying a REO property from them. Usually 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 find out as much as you can about what they know about the condition of the property and what their process is for getting offers. Since banks most commonly sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unseen damage and cancel 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. Once you've presented your offer, you can expect the bank to respond with a counter offer. Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Realize, 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.