Purchasing REO property or a foreclosure in St. Clair County?

What's an REO?

"REO" or Real Estate Owned are properties which have been foreclosed upon and are presently held by the bank or mortgage company. This is not the same as 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. You must also be ready to pay with cash in hand. To top everything off, you'll receive the property 100% as is. That possibly could include current liens and even current occupants that need to be expelled.

A bank-owned property, on the other hand, is a more tidy and attractive option. The REO property didn't find a buyer during foreclosure auction. Now the lender owns it. The lender will attend 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.

Note that REOs may be exempt from normal disclosure requirements. For example, in Nevada, it is optional for foreclosures to have a Property Disclosure Statement, a document that normally requires sellers to make known any defects they are knowledgeable of. By hiring Frank Real Estate, you can rest assured knowing all parties are fulfilling Michigan state disclosure requirements.

Are REO properties a bargain in St. Clair County?

It's occasionally believed that any REO must be a good deal and a possibility for easy money. This often isn't true. You have to be prudent about buying a repossession 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 motivated to minimize any losses.

When pondering the value of REO property, carefully analyze 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. It is possible to find REOs with money-making potential, and many people do very well buying and selling foreclosures. But, there are also many REOs that are not good buys and may lose money.

Prepared to make an offer?

Most lenders have staff dedicated to REO that you'll work with when buying REO property from them. Typically 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 what they know concerning the condition of the property and what their process is for getting offers. Since banks almost always sell REO properties "as is", you may want to include an inspection contingency in your offer that gives you time to check for unknown damage and cancel the offer if you find it. If, as a buyer, you can provide documentation showing your ability to secure financing, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This is generally true for any real estate offer.)

After you've made your offer, it's customary for the bank to counter offer. From there it will be up to you to decide whether to accept their counter, or submit another counter offer. Your deal might be settled in one 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. Frank Real Estate is used to working around the schedules of this type of seller and will do everything possible to ensure there are no undue delays.