Buying a REO or foreclosure in Bakersfield
What's an REO?
REO's or Real Estate Owned are homes which have completed the foreclosure process and are presently owned by the bank or mortgage company. This is not the same as 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 accrued during the foreclosure process. The buyer must also be able to pay with cash in hand. And on top of all that, you'll get the property one-hundred percent as is. That possibly may consist of prevailing liens and even current tenants that need to be removed.
A REO, by contrast, is a more tidy and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. Now the bank owns it. The bank will take care of 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. You should be aware that REOs may be exempt from typical disclosure requirements. For instance, in Calfornia, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to make known any defects of which they are knowledgeable.
Are REO's a bargain in Bakersfield?
It is commonly assumed that any REO must be a steal and an possibility for easy money. This simply isn't true. You have to be prudent about buying a REO if your intent is profit from the sell. While it's true that the bank is often anxious to sell it soon, they are also strongly encouraged 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 buying and selling foreclosures. Still there are also many REO's that are not good buys and may lose money.
Ready to make an offer?
Most banks have a REO department that you'll work with while buying a REO property from them. Commonly 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 concerning the condition of the property and what their process is for accepting offers. Since banks usually 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 withdraw the offer if you find it.
As with making any offer on real estate, your offer may be 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. From there it will be your decision whether to accept their counter, or offer a counter to the counter offer. Understand, you'll be dealing with a process that probably involves several people at the bank, and they don't work evenings or weekends. It's not uncommon for the process of offers and counter offers to take days or even weeks.