Looking for REO property or a foreclosure in Phoenix?
What's an REO?
"REO" means Real Estate Owned. These are houses which have completed the foreclosure process and are currently held 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. The buyer must also be able to pay with cash in hand. Finally, you'll get the property 100% as is. That possibly could include standing liens and even current tenants that may require expulsion.
A bank-owned property, on the other hand, is a much neater and attractive deal. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The bank 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.
Take notice that REOs may be exempt from normal disclosure requirements. For instance, in California, banks are not required to give a Transfer Disclosure Statement, a document that usually requires sellers to tell you about any defects they are informed of. By hiring Teddy Castro Group - NeXGen Real Estate, you can rest assured knowing all parties are fulfilling Arizona state disclosure requirements.
Are REO properties a bargain in Maricopa County?
It is sometimes presumed that any foreclosure must be a good buy and a chance for easy money. This simply isn't true. You have to be prudent about buying a REO if your intent is to make money. Even though the bank is often anxious to sell it fast, they are also looking to get as much as they can for it.
When considering the value of 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 flipping foreclosures. But, there are also many REOs that are not good buys and may not be money makers.
Ready to make an offer?
Most banks have a department dedicated to REO that you'll work with in buying REO property from them. To get their properties advertised on the local MLS, the lender will frequently contract with a listing agent.
Before 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 their knowledge about the condition of the property and what their process is for getting offers. Since banks usually 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 unseen damage and cancel the offer if you find it. If, as a buyer, you can provide documentation demonstrating your ability to secure financing, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This goes for any real estate offer.)
Once you've made your offer, you can expect the bank to respond with a counter offer. Then it will be your choice whether to accept their counter, or offer a counter to the counter offer. Your transaction might be settled in a single day, but that's rare. 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.