Buying REO property or a foreclosure in San Diego?

What's an REO?

"REO" is Real Estate Owned. These are homes which have completed the foreclosure process that the bank or mortgage company now owns. This differs from 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 added during the foreclosure process. The buyer must also be willing to pay with cash in hand. Finally, you'll get the property 100% as is. That possibly could include standing liens and even current residents that need to be removed.

A bank-owned property, on the other hand, is a much cleaner and attractive transaction. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank will deal with the elimination of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing.

You should be aware 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 ordinarily requires sellers to reveal any defects of which they are informed. By hiring Torrey Properties, you can rest assured knowing all parties are fulfilling California state disclosure requirements.

Am I assured a low price when purchasing an REO property in San Diego?

It is sometimes believed that any foreclosure must be a bargain and an opportunity for guaranteed profit. This often isn't true. You have to be prudent about buying a REO if your intent is to make money off of it. While it's true that the bank is typically eager to sell it promptly, they are also looking to minimize any losses.

Look carefully at the listing and sales prices of comparable properties in the neighborhood when making an offer on an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in. There are bargains with potential to make money, and many people do very well buying foreclosures. But, there are also many REOs that are not good buys and may not be money makers.

Ready to make an offer?

Most lenders have a department dedicated to REO that you'll work with while 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 discover 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 typically 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 unknown damage and retract the offer if you find it. As with making any offer on real estate, providing documentation of your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender.

Once you've presented your offer, it's customary for the bank to make a counter offer. Then it will be up to you to decide whether to accept their counter, or make another counter offer. Your transaction could be settled in a single day, but that's rare. Since offers and counter offers usually give the other party a day or longer to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer. Torrey Properties is used to working around the schedules of this type of seller and will do everything possible to ensure there are no undue delays.