Making an offer on REO property or a foreclosure in Frisco?
Just as with any property purchase, your wisest move is to hire a professional real estate agent.
If you have questions about real estate in Frisco, Texas, call me
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What's an REO?
"REO" is an abbreviation for Real Estate Owned. These are houses which have been foreclosed upon that the bank or mortgage company presently owns. This is different than real estate 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. You must also be willing to pay with cash in hand. And on top of all that, you'll accept the property totally as is. That may consist of existing liens and even current tenants that may require eviction.
A bank-owned property, on the other hand, is a more tidy and attractive transaction. The REO property did not find a buyer during foreclosure auction. Now the lender owns it. The bank will take care of the elimination 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.
In California, for example, banks are not required to give a Transfer Disclosure Statement,
a document that normally requires sellers to tell you about any defects they are knowledgeable of.
By hiring Parker Anderson Real Estate Services, LLC, you can rest assured knowing all parties are fulfilling Texas state disclosure requirements.
Is REO property in Frisco a bargain?
It's occasionally believed that any REO must be a bargain and a chance for easy money. This isn't necessarily the case. You have to be very careful about buying a repossession if your intent is to make a profit. While it's true that the bank is typically eager to sell it quickly, they are also motivated to minimize any losses.
When pondering 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.
The bargains with money making potential exist, and many people do very well flipping foreclosures. Still, there are also many REOs that are not good buys and may lose money.
Time to make an offer?
Most mortgage companies have staff dedicated to REO that you'll work with while buying REO property from them. To get their properties advertised on the local MLS, the lender will often contract with a listing agent.
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 their knowledge regarding the condition of the property and what their process is for accepting offers. Since banks most commonly 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 terminate the offer if you find it.
As with making any offer on real estate, providing documentation showing your ability to secure financing 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 respond with a counter offer. Then it will be your choice whether to accept their counter, or offer a counter to the counter offer.
Be aware, you'll be dealing with a process that generally involves multiple people at the bank, and they don't work evenings or weekends. It's quite common for the process of offers and counter offers to take days or even weeks.