Interested in REO property or a foreclosure in Memphis?
Making an offer on a bank-owned property is not something to be taken casually.
What's an REO?
"REO" or Real Estate Owned are houses which have been through foreclosure and are now possessed by the bank or mortgage company. This is unlike 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 added during the foreclosure process. You must also be able to pay with cash in hand. Finally, you'll receive the property 100% as is. That may involve prevailing liens and even current tenants that need to be put out.
A bank-owned property, conversely, is a much cleaner and attractive proposition. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The lender will see to the elimination of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing.
Note that REOs may be exempt from typical disclosure requirements. For example, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that typically requires sellers to tell you about any defects of which they are informed. By hiring Marx-Bensdorf, REALTORS, you can rest assured knowing all parties are fulfilling Tennessee state disclosure requirements.
Are REO properties a bargain in Memphis?
It's frequently assumed that any foreclosure must be a bargain and a possibility for easy money. This frequently isn't true. You have to be cautious about buying a REO if your intent is make money. Even though the bank is usually anxious to offload it quickly, they are also looking to get as much as they can for it.
When pondering the value of REO property, 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 buying foreclosures. However there are also many REOs that are not good buys and not likely to turn a profit.
All set to make an offer?
Most banks have a department dedicated to REO that you'll work with while buying REO property from them. Typically the REO department will use a listing agent to get their REO properties listed on the local MLS.
Prior to 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 their knowledge regarding the condition of the property and what their process is for receiving offers. Since banks typically 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 retract the offer if you find it. If, as a buyer, you can provide documentation proving 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 is generally true for any type of real estate offer.)
Once you've presented your offer, you can expect the bank to respond with a counter offer. Then it will be your decision whether to accept their counter, or submit another counter offer. Realize, you'll be working with a process that most likely involves a group of 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 going back and forth.
* MOL = More or Less
Marx-Bensdorf, REALTORS 5860 Ridgeway Center Pkwy #100 Memphis, TN 38120