Buying REO property or a foreclosure in Cedar Rapids?
Investing in a bank-owned property is not something to be taken casually. Should you have questions about real estate in Cedar Rapids, Iowa, call me or send me an e-mail.
What is an REO?
"REO" or Real Estate Owned are homes which have completed the foreclosure process and are currently held by the bank or mortgage company. This is different than 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 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 receive the property totally as is. That possibly could consist of standing liens and even current residents that may require expulsion.
A bank-owned property, by contrast, is a much neater and attractive proposition. The REO property didn't 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.
Take notice that REOs may be exempt from standard disclosure requirements. For instance, in California, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to make known any defects they are aware of. By hiring WHY USA Eastern Iowa Realty, you can rest assured knowing all parties are fulfilling Iowa state disclosure requirements.
Is REO property in Cedar Rapids a bargain?
It's sometimes assumed that any REO must be a steal and a chance for easy money. This often isn't true. You have to be prudent about buying a REO if your intent is make a profit. While it's true that the bank is typically anxious to offload it quickly, they are also looking to minimize any losses.
When considering the value of a foreclosure, 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. 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 may lose money.
Time to make an offer?
Most banks have a department 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.
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 taking offers. Since banks almost always sell REO properties "as is", it may be in your best interest 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, 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 submitted your offer, it's customary for the bank to respond with a counter offer. Then it will be up to you to decide whether to accept their counter, or make another counter offer. Be aware, 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 uncommon for there to be days or even weeks of going back and forth. WHY USA Eastern Iowa Realty is accustomed to these situations and will work to ensure there are no undue delays.
260 33rd Ave SW Suite E Cedar Rapids, IA 52404 Phone: Fax:
When considering the value of a foreclosure, 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. 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 may lose money.
