Buying REO property or a foreclosure in Phoenix?
Investing in a bank-owned property is not something to be taken lightly.
What's an REO?
"REO" or Real Estate Owned are properties which have been foreclosed upon and are now held by the bank or mortgage company. This is unlike 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. You must also be willing to pay with cash in hand. And on top of all that, you'll receive the property completely as is. That could comprise of existing liens and even current denizens that need to be evicted.
A bank-owned property, conversely, is a much cleaner and attractive deal. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The bank will attend to the elimination of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing.
Note that REOs may be exempt from typical disclosure requirements.
For instance, in California, banks are exempt from giving a Transfer Disclosure Statement,
a document that usually requires sellers to make known any defects of which they are knowledgeable.
By hiring Prime House LLC, you can rest assured knowing all parties are fulfilling Arizona state disclosure requirements.
Is REO property in Phoenix a bargain?
It is occasionally assumed that any REO must be a good deal and a possibility for guaranteed profit. This simply isn't true. You have to be prudent about buying a REO if your intent is to profit from the sale. While it's true that the bank is usually eager to sell it soon, they are also looking to minimize any losses.
When contemplating what to pay for a foreclosure, carefully analyze 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. Still, there are also many REOs that are not good buys and not likely to turn a profit.
Time to make an offer?
Most banks have staff dedicated to REO that you'll work with when buying 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 their knowledge about the condition of the property and what their process is for accepting offers. Since banks usually sell REO properties "as is", you may want to include an inspection contingency in your offer that gives you time to check for hidden damage and cancel the offer if you find it.
If, as a buyer, you can provide documentation showing your ability to pay, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This holds for any type of real estate offer.)
After you've submitted 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 submit another counter offer.
Be aware, you'll be contending with a process that usually involves several 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.