Purchasing REO property or a foreclosure in Austin?
Just as with any property purchase, your smartest move is to hire a professional real estate agent.
Should you have questions about real estate in Austin, Texas, call me or send me an e-mail.
What's an REO?
"REO" or Real Estate Owned are properties which have been foreclosed upon that the bank or mortgage company now holds. This is not the same as 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 accrued during the foreclosure process. You must also be willing to pay with cash in hand. To top everything off, you'll accept the property entirely as is. That may consist of existing liens and even current occupants that may require removal.
A bank-owned property, by contrast, is a much neater and attractive deal. The REO property was unable to find a buyer during foreclosure auction. The bank now owns it. The lender will deal with 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.
Note that REOs may be exempt from standard disclosure requirements.
For example, in California, banks are not required to give a Transfer Disclosure Statement,
a document that ordinarily requires sellers to make known any defects they are knowledgeable of.
By hiring Premiere Team Real Estate, you can rest assured knowing all parties are fulfilling Texas state disclosure requirements.
Am I guaranteed a good deal when purchasing a bank owned property in Austin?
It's sometimes thought that any foreclosure must be a good buy and a chance for easy money. This frequently isn't true. You have to be prudent about buying a repossession if your intent is profit from the sale. Even though the bank is usually eager to sell it soon, they are also motivated to minimize any losses.
Look carefully at the listing and sales prices of competing properties in the neighborhood when making an offer on an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in.
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 not likely to turn a profit.
Prepared to make an offer?
Most lenders have staff 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 typically use a listing agent.
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 taking offers. Since banks almost always 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 withdraw the offer if you find it.
As with making any offer on real estate, providing documentation showing your ability to secure financing may make your offer more attractive, such as a pre-approval letter from a lender.
After you've submitted your offer, it's customary for the bank to make a counter offer. At this point it will be your decision whether to accept their counter, or make another counter offer.
Be aware, you'll be working with a process that probably involves several people at the bank, and they don't work evenings or weekends. It's quite common for there to be days or even weeks of negotiating back and forth.
Look carefully at the listing and sales prices of competing properties in the neighborhood when making an offer on an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in.
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 not likely to turn a profit.
