Buying a REO or foreclosure in Jacksonville

What's an REO?

REO's or Real Estate Owned are properties that have completed the foreclosure process and are currently possessed by the bank or mortgage company. This is not the same as real estate 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 amassed during the foreclosure process. You must also be prepared to pay with cash in hand. Finally, you'll accept the property one-hundred percent as is. That may comprise standing liens and even current tenants that need to be evicted.

A REO, on the other hand, is a much cleaner and attractive option. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The bank will handle 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. Note that REOs may be exempt from standard disclosure requirements. For example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that typically requires sellers to reveal any defects of which they are aware.

Are REO's a bargain in Jacksonville?

It is sometimes believed that any REO must be a bargain and an opportunity for easy money. This isn't always 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 quickly, they are also strongly interested to get as much as they can for it. When contemplating 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 buying foreclosures. But 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 lenders have a REO department that you'll work with while 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. 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 concerning the condition of the property and what their process is for receiving offers. Since banks typically sell REO properties "as is", you may want 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 submitted your offer, you can expect the bank to respond with a counter offer. From there it will be your choice whether to accept their counter, or offer a counter to the counter offer. Be aware, you'll be contending with a process that probably 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.