Buying a REO or foreclosure in Beverly Hills
What is an REO?
REO's or Real Estate Owned are houses that have completed the foreclosure process which the bank or mortage company currently holds. This is different than 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 accrued during the foreclosure process. The buyer must also be ready to pay with cash in hand. To top everything off, you'll accept the property completely as is. That might include standing liens and even current denizens that need to be expelled.
A REO, on the contrary, is a much neater and attractive transaction. The REO property was unable to find a buyer during foreclosure auction. The bank now owns it. The lender 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. Take notice that REOs may be exempt from standard disclosure requirements. For instance, in Calfornia, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects they are knowledgeable of.
Are REO's a bargain in Beverly Hills?
It's sometimes assumed that any REO must be a steal and an opportunity for easy money. This isn't always 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 fast, they are also strongly motivated to get as much as they can for it. When contemplating 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 not be money makers.
All set to make an offer?
Most lenders have a REO department that you'll work with while 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 find out as much as you can about what they know about the condition of the property and what their process is for getting offers. Since banks usually sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unknown 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 made your offer, you can expect the bank to counter offer. At this point it will be up to you to decide whether to accept their counter, or submit another counter offer. Realize, you'll be working with a process that generally involves a group of people at the bank, and they don't work evenings or weekends. It's not unusual for the process of offers and counter offers to take days or even weeks.