Steals and Deals: Foreclosure Homes For Sale

10-27-09 Lake Murray Lake Front Home 2acres Foreclosure
 

Buying bank owned properties in Columbia and Lexington SC
There is a lot of interest in buying bank owned properties these days. A lot of information, some good and some bad, is floating around about the subject.   Often the information offered is for sale, with the promise that you can make a lot of money with little effort once you know “the secret formula”.  The fact is that there are no secrets, and to make money does require effort and time. 

What’s an REO?
REO stands for “Real Estate Owned”.  These are properties that have gone through foreclosure and are now 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 accumulated during the foreclosure process.  You must also be prepared to pay with cash in hand.  And on top of all that, you’ll receive the property 100% “as is”.  That could include existing liens and even current occupants that need to be evicted.  A REO, by contrast, is a much “cleaner” and attractive transaction.  The REO property did not find a buyer during foreclosure auction.  The bank now owns it.  The bank will see to 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.  Do be aware that REO’s may be exempt from normal disclosure requirements.  In South Carolina, for example, banks are exempt from giving a Property Disclosure Statement, a document that normally requires sellers to tell you about any defects they are aware of.

Is it a bargain?
It’s commonly assumed that any REO must be a bargain and an opportunity for easy money.  This simply isn’t true.  You have to be very careful about buying a REO if your intent is to make money off of it.  While it’s true that the bank is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it.  When considering 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.  The bargains with money making potential exist, and many people do very well buying foreclosures.  But there are also many REO’s that are not good buys and not likely to turn a profit.  Work with a professional real estate agent, to help you get the most current comparables for that investment prospect and saleability in that area.

Ready to make an offer?
Most banks have a REO department that you’ll work with in buying a REO property from them.  Typically 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 about the condition of the property and what their process is for receiving offers.  Since banks almost always 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 made your offer, you can expect the bank to make a counter offer.  Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer.  Realize, you’ll be dealing with a process that probably involves multiple people at the bank, and they don’t work evenings or weekends.  It’s not unusual for the process of offers and counter offers to take days or even weeks.

For some properties, the only way to make an offer is through internet bidding.  In these cases, you sometimes need the help of a registered broker to make the offer for you.  EXIT Real Estate Consultants is registered to handle this type of bidding. 

MORE Tips before Buying Foreclosures in Columbia & Lexington SC
Have Patience - Remember you are dealing with banks.  The response time is not as quick as buying from an actual homeowner.  The banks are currently are overrun with these REO homes so your offer is sitting on a file below a stack of offers on a bank employees desk.  Repsonse from an offer could be within a few hours to a few days.  Closing could be fast or delayed beyond your control due to titlework issues or financing.  You want clear title to the home so you can resell it later.  If you think the banks are over their heads, the foreclosure courts are just as overwhelmed right now. 
Get a Home Inspection -  the price of the home is a super deal for a reason.  Like any business, a bank doesn't want to lose any profit from a sale.  Rather than fix the home and putting it back on the market, the bank is transferring that cost and headache to you.  The bigger repairs that you don't see could be structural, electrical, and plumbing.   Spend the money for a home inspection to get a better understanding on what you are buying before that investment becomes a money pit of unforeseen repairs.
Get Your Finances in Place - The great deals always go fast so you need to have your finances in place. Other investors are also on the sidelines looking for the same investment properties you are so timing is critical.  Great deals can also lead to multiple offers and a bidding situation so know your limits before getting in this situation.  CASH deals are great but don't always get the leverage you think you would get on an offer.  It does help to make it a quick closing which the bank does like and less chances of falling through.  If working with a bank/investor or a cash offer, have the documents ready to show you are able to purchase the property.  Having all the documentation in place, can make you prepare the offer faster. The negotiation is less emotional for REO because the bank only looks at their sellers net.  The best offer with the less cost for the bank wins.
Have your Contractors Ready - Timing is critical, because you need to know if this REO property will make money or break you.  If you will not be doing the repairs yourself, have your contractors ready to give you estimates.  The more major the repair work get the costs from a professional.  Electrical, Plumbing, Structural, and Roofing repairs can be very costly.

Foreclosure Homes Columbia & Lexington SC