| Ever wonder what the difference is between a | | | | loan on that property. All cash is not needed. |
| foreclosure and an REO or real estate owned | | | | * REO properties in most instances come with clear |
| property? | | | | title. |
| A foreclosure is a legal process in which the owner's | | | | Some things to look for when purchasing an REO or |
| right to a property is terminated. It usually involves a | | | | already foreclosed property: |
| forced sale of the property by a public auction to | | | | 1. Work with your realtor and the Title Company |
| repay whatever debt is owed on the property. Real | | | | representative to make sure that the title to the home |
| Estate Owned (REO) is real property that has been | | | | you're buying is free and clear. |
| foreclosed by a lender and is now owned by the | | | | 2. Understand where the pricing is in your market so |
| lender due to an unsuccessful sale at the public | | | | you can submit a viable purchase offer. Your realtor |
| auction. | | | | will look at the local market conditions and historical |
| Here are some facts: | | | | trends prior to submitting your offer to the bank in |
| * A foreclosure property goes through a foreclosure | | | | order to make sure you have submitted an offer with |
| auction which is usually held on an assigned date on | | | | appropriate pricing. |
| the steps of the county court house. | | | | 3. Banks do NOT provide many, if any, disclosures, so |
| * Foreclosure property buyers need to be able to | | | | be prepared for some surprises. Additionally some |
| purchase the property for CASH. | | | | banks will require you to sign their private addendums. |
| * At auction, an opening bid on the property is set by | | | | Make sure you read each item carefully as you may |
| the foreclosing lender. This opening bid is usually equal | | | | not be comfortable with their terms. |
| to the outstanding loan balance, interest accrued, and | | | | 4. Make sure that all home inspections are completed - |
| any additional fees and attorney fees associated with | | | | don't forget a sewer line inspection - prior to close of |
| the Trustee Sale. If there are no bids higher than the | | | | escrow. In fact all inspections should be completed |
| opening bid, the property will be purchased by the | | | | during the first 17 days of your escrow period in order |
| attorney conducting the sale, for the lender. | | | | to give you plenty of time to remove contingencies. |
| * Foreclosure property buyers inherit all unpaid liens, | | | | Some banks are allowing for certain types of repairs |
| including mortgage debt, taxes, construction loans, | | | | so you may be able to ask for credits. |
| home equity lines of credit, and possibly a second or | | | | 5. Be aware that banks will charge higher loan rates |
| third mortgage. | | | | on investment properties. So if you are thinking about |
| On the other hand, an REO property is: | | | | buying an REO property as a second home, make |
| * REO property is already owned by the bank. | | | | sure you check out the rates ahead of time and |
| * Home buyers are able to get a regular mortgage or | | | | speak to your CPA. |