Buying a REO or foreclosure in Beverly Hills
What is an REO?
REO's or Real Estate Owned are homes that have gone through foreclosure and are currently held by the bank or mortgage company. This differs from 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 accrued during the foreclosure process. You must also be able to pay with cash in hand. To top everything off, you'll accept the property completely as is. That possibly will consist of current liens and even current tenants that need to be removed.
A REO, conversely, is a much neater and attractive proposition. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will see to the removal 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. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to tell you about any defects of which they are aware.
Is an REO in Beverly Hills a bargain?
It is frequently presume that any REO must be a good buy and an chance for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is profit from the sell. While it's true that the bank is typically anxious to sell it soon, they are also strongly interested to get as much as they can for it. When considering 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 flipping foreclosures. But there are also many REO's that are not good buys and may lose money.
All set to make an offer?
Most banks have a REO department that you'll work with when 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. Before 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 what they know about the condition of the property and what their process is for taking 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.
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. After you've submitted your offer, you can expect the bank to make a counter offer. Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be contending with a process that probably involves a group of 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.