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Purchasing REO property or a foreclosure in Southern MD?
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Savvy consumers will turn to a seasoned pro when considering a foreclosed property. For more information, just call or e-mail us. We're glad to address questions you have about real estate foreclosures. |
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What is an REO?"REO" is short for Real Estate Owned. These are houses which have gone through foreclosure that the bank or mortgage company currently holds. 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 accumulated during the foreclosure process. The buyer must also be willing to pay with cash in hand. Finally, you'll accept the property entirely as is. That possibly will include standing liens and even current tenants that need to be kicked out.
A bank-owned property, conversely, is a much neater and attractive deal. The REO property did not find a buyer during foreclosure auction. Now the bank owns it. The lender will deal with 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.
You should be aware that REOs may be exempt from typical disclosure requirements. For example, in Maryland, banks are exempt from giving a MD Property Disclosure/Disclaimer Statement, a document that usually requires sellers to make known any defects of which they are aware.
Am I assured a low price when investing in a bank owned property?It's occasionally presumed that any foreclosure must be a steal and an opportunity for guaranteed profit. This isn't necessarily true. You have to be prudent about buying a repossession if your intent is make a profit. Even though the bank is often eager to sell it soon, they are also looking to get as much as they can for it.
 Look closely at the listing and sales prices of competing homes in the neighborhood when considering the purchase of an REO. And factor in any repairs or remodeling necessary to prepare the house for resale or moving in. The bargains with money making potential exist, and many people do very well flipping foreclosures. Still, there are also many REOs that are not good buys and not likely to turn a profit.
Prepared to make an offer?Most banks have a department dedicated to REO that you'll work with in 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 learn 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 typically sell REO properties "as is", you'll want to be sure and include an inspection contingency in your offer that gives you time to check for unseen damage and withdraw the offer if you find it. As with making any offer on real estate, providing documentation showing your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender.
Once you've submitted your offer, it's customary for the bank to make a counter offer. At this point it will be up to you to decide whether to accept their counter, or make another counter offer. Your deal could be final in one day, but that's usually not the case. Since offers and counter offers usually give the other party a day or longer to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer.
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