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Buying REO property or a foreclosure in Phoenix?
Investing in a bank-owned property is not something to be taken lightly. If you have questions regarding real estate in Phoenix, Arizona,
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What's an REO?
"REO" or Real Estate Owned are houses which have been through foreclosure that the bank or mortgage company currently possesses. This differs from a property up for foreclosure auction.
When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process. You must also be ready to pay with cash in hand. Finally, you'll get the property 100% as is. That might consist of current liens and even current residents that need to be put out.
A bank-owned property, by contrast, is a much neater and attractive option. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The lender will attend to the removal of tax liens, evict occupants if needed and generally plan for the issuance of a title insurance policy to the buyer at closing.
Note that REOs may be exempt from normal disclosure requirements. For instance, in California, banks are not required to give a Transfer Disclosure Statement, a document that ordinarily requires sellers to disclose any defects they are knowledgeable of. By hiring ZipWorld Realty, you can rest assured knowing all parties are fulfilling Arizona state disclosure requirements.
Am I guaranteed a bargain when purchasing a bank owned property in Phoenix?
It is frequently presumed that any REO must be a steal and a possibility for easy money. This isn't necessarily the case. You have to be cautious about buying a repossession if your intent is to make money off of it. Even though the bank is often anxious to offload it fast, they are also looking to get as much as they can for it.
Look carefully at the listing and sales prices of similar properties in the neighborhood when making an offer on an REO. And factor in any repairs or remodeling necessary to prepare the house for resale or moving in. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. Still there are also many REOs that are not good buys and may not be money makers.
Ready to make an offer?
Most lenders have staff dedicated to REO that you'll work with while buying REO property from them. Commonly 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 learn as much as you can about their knowledge regarding the condition of the property and what their process is for accepting offers. Since banks typically sell REO properties "as is", you may want to 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 goes for any type of real estate offer.)
After you've made your offer, you can expect the bank to respond with a counter offer. From there it will be your decision whether to accept their counter, or submit another counter offer. Your transaction might be final in a single day, but that's rare. Since offers and counter offers usually give the other party a day or longer to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer.