Interested in REO property or a foreclosure in Austin?
Just as with any home purchase, your smartest move is to hire a professional real estate agent. Should you have any questions about real estate in Austin, Texas call us at (512)786-SELL
What is an REO?
“REO” is an abbreviation for Real Estate Owned. These are homes which have been through foreclosure that the bank or mortgage company now holds. 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 amassed during the foreclosure process. The buyer must also be willing to pay with cash in hand. Finally, you’ll accept the property 100% as is. That possibly will include existing liens and even current residents that may require removal.
A bank-owned property, on the contrary, is a more tidy and attractive option. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The bank will take care of the removal of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing.
Note that REOs may be exempt from normal disclosure requirements. For example, in Texas, it is optional for foreclosures to have a Property Disclosure Statement, a document that normally requires sellers to tell you about any defects they are aware of. By hiring Home Stars of Texas Realty, you can rest assured knowing all parties are fulfilling Texas state disclosure requirements.
Is REO property in Austin a bargain?
It’s sometimes presumed that any REO must be a steal and an opportunity for easy money. This often isn’t true. You have to be prudent about buying a REO if your intent is to make a profit. While it’s true that the bank is usually anxious to sell it soon, they are also motivated to get as much as they can for it.
Look carefully at the listing and sales prices of competing homes in the neighborhood when considering the purchase of an REO. And factor in any repairs or remodeling necessary to prepare the house for resale or moving in. The bargains with money making potential exist, and many people do very well buying foreclosures. Still, there are also many REOs that are not good buys and may lose money.
Ready to make an offer?
Most mortgage companies have staff dedicated to REO that you’ll work with while buying REO property from them. To get their properties advertised on the local MLS, the lender will typically hire a listing agent.
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 regarding the condition of the property and what their process is for receiving 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 unknown damage and terminate the offer if you find it. If, as a buyer, you can provide documentation demonstrating 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 holds for any real estate offer.)
After you’ve presented your offer, it’s customary for the bank to counter offer. Then it will be your choice whether to accept their counter, or offer a counter to the counter offer. Your transaction 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. Home Stars of Texas Realty is accustomed to these situations and will work to ensure there are no undue delays.