Looking for REO property or a foreclosure in La Jolla?
What’s an REO?
“REO” or Real Estate Owned are houses which have completed the foreclosure process that the bank or mortgage company now possesses. This differs from 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 accrued during the foreclosure process. You must also be able to pay with cash in hand. To top everything off, you’ll accept the property entirely as is. That might consist of existing liens and even current denizens that may require eviction.
A bank-owned property, conversely, is a more tidy and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. The bank now owns it. The bank will take care of the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing.
Take notice that REOs may be exempt from normal disclosure requirements. In California, for example, banks are not required to give a Transfer Disclosure Statement, a document that normally requires sellers to make known any defects they are knowledgeable of. By hiring The Lotzof Group, you can rest assured knowing all parties are fulfilling California state disclosure requirements.
Are REO properties a bargain in La Jolla?
It is occasionally assumed that any foreclosure must be a good buy and a possibility for guaranteed profit. This simply isn’t true. You have to be cautious about buying a repossession if your intent is to make money off of it. While it’s true that the bank is typically eager to sell it quickly, they are also looking to minimize any losses.
Look carefully at the listing and sales prices of similar properties in the neighborhood when considering the purchase of an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in. There are bargains with potential to make money, 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.
Prepared to make an offer?
Most banks have staff dedicated to REO that you’ll work with while buying REO property from them. Normally 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 discover as much as you can about their knowledge about the condition of the property and what their process is for taking offers. Since banks most commonly sell REO properties “as is”, it’s often prudent to include an inspection contingency in your offer that gives you time to check for unknown damage and retract the offer if you find it. As with making any offer on real estate, providing documentation of your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender.
After you’ve presented your offer, you can expect the bank to counter offer. Then it will be your decision whether to accept their counter, or offer a counter to the counter offer. Your deal could be final 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.