Purchasing REO property or a foreclosure in Indianapolis?

What's an REO?

"REO" is Real Estate Owned. These are houses which have completed the foreclosure process and are currently possessed by the bank or mortgage company. This differs from a property 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. The buyer must also be willing to pay with cash in hand. And on top of all that, you'll accept the property entirely as is. That may consist of prevailing liens and even current tenants that need to be evicted.

A bank-owned property, on the other hand, is a much neater and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The lender will take care of 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.

Take notice that REOs may be exempt from typical disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects of which they are informed. By hiring The Sanders Group Realty, you can rest assured knowing all parties are fulfilling Indiana state disclosure requirements.

Is REO property in Indianapolis a bargain?

It's frequently believed that any REO must be a good deal and an opportunity for easy money. This often isn't true. You have to be very careful about buying a REO if your intent is to profit from the sale. Even though the bank is usually eager to sell it soon, they are also looking to get as much as they can for it.

When contemplating the value of a foreclosure, 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. There are bargains with potential to make money, and many people do very well buying foreclosures. However, there are also many REOs that are not good buys and may not be money makers.

Prepared to make an offer?

Most mortgage companies have a department dedicated to REO that you'll work with in buying REO property from them. Normally the REO department will use a listing agent to get their REO properties listed on the local MLS.

Before 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 taking offers. Since banks typically sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unseen damage and terminate 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.

Once you've made your offer, you can expect the bank to counter offer. At this point it will be up to you to decide whether to accept their counter, or submit another counter offer. Your transaction could be final 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.

n 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.