Buying a REO or foreclosure in Beverly Hills
What's an REO?
REO is short for Real Estate Owned. These are homes that have completed the foreclosure process and are now held by the bank or mortgage company. This is not the same as a property 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. And on top of all that, you'll receive the property one-hundred percent as is. That possibly will comprise prevailing liens and even current occupants that need to be put out.
A REO, on the contrary, is a much neater and attractive transaction. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The lender will handle the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Do be aware that REOs may be exempt from typical disclosure requirements. In California, for example, banks do not have to give a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are aware of.
Are REO's a bargain in Beverly Hills?
It's occasionally believed that any REO must be a good buy and an possibility for easy money. This simply isn't true. You have to be prudent about buying a REO if your intent is to make money off of it. While it's true that the bank is often anxious to sell it promptly, they are also strongly motivated 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. There are bargains with potential to make money, and many people do very well buying foreclosures. However there are also many REO's that are not good buys and may lose money.
Ready to make an offer?
Most mortgage companies have a REO department that you'll work with when buying a REO property from them. Typically 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 learn as much as you can about what they know about the condition of the property and what their process is for accepting offers. Since banks typically sell REO properties "as is", it's often prudent to 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 of your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender. Once you've made your offer, you can expect the bank to make a counter offer. From there it will be your decision whether to accept their counter, or make another counter offer. Realize, you'll be dealing with a process that generally involves multiple 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.