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Foreclosures & Short Sales
Making an offer on REO property or a foreclosure?
What's an REO?
"REO" means Real Estate Owned. These are homes which have been foreclosed upon and are presently 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 willing to pay with cash in hand. To top everything off, you'll accept the property entirely as is. That may consist of current liens and even current denizens that need to be expelled.
A bank-owned property, on the other hand, is a more tidy and attractive deal. The REO property was unable to find a buyer during foreclosure auction. Now the lender 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.
Do be aware that REOs may be exempt from normal disclosure requirements. For instance, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that usually requires sellers to reveal any defects they are informed of. By hiring RE/MAX On Track, you can rest assured knowing all parties are fulfilling Tennessee state disclosure requirements.
Are REO properties a bargain?
It's occasionally presumed that any REO must be a steal and a chance for guaranteed profit. This often isn't true. You have to be very careful about buying a repossession if your intent is make money. While it's true that the bank is usually anxious to sell it quickly, they are also motivated to get as much as they can for it.
 When pondering what to pay for a foreclosure, 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 REOs that are not good buys and not likely to turn a profit.
Time to make an offer?
Most banks have a department 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 often contract with a listing agent.
Before 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 their knowledge concerning the condition of the property and what their process is for taking offers. Since banks typically sell REO properties "as is", you'll want to be sure and include an inspection contingency in your offer that gives you time to check for hidden damage and terminate 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 counter offer. At this point it will be up to you to decide whether to accept their counter, or submit another counter offer. Your deal might be settled in a single day, but that's usually not the case. Since offers and counter offers usually allow a day or more for the other party to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer. RE/MAX On Track is accustomed to these situations and will work to ensure there are no undue delays.
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