Interested in REO property or a foreclosure on Long Island?
Purchasing a bank-owned property is not something to be taken lightly.
What is an REO?
"REO" is an abbreviation for Real Estate Owned. These are homes which have completed the foreclosure process that the bank or mortgage company now holds. This differs from 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. The buyer must also be ready to pay with cash in hand. And on top of all that, you'll get the property completely as is. That might include existing liens and even current occupants that may require eviction.
A bank-owned property, conversely, is a much cleaner and attractive deal. The REO property didn't find a buyer during foreclosure auction. Now the bank owns it. The bank will take care of the elimination 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 typical disclosure requirements. For example, in Nevada, it is optional for foreclosures to have a Property Disclosure Statement, a document that usually requires sellers to reveal any defects they are informed of. By hiring Prudential Douglas Elliman Real Estate, you can rest assured knowing all parties are fulfilling New York state disclosure requirements.
Are REO properties on Long island a bargain?
It is commonly presumed that any foreclosure must be a bargain and a chance for guaranteed profit. This isn't always the case. You have to be very careful about buying a repossession if your intent is profit from the sale. Even though the bank is often anxious to sell it soon, they are also looking to get as much as they can for it.
Look carefully at the listing and sales prices of similar properties in the neighborhood when making an offer on an REO. And factor in any repairs or remodeling necessary to prepare the house for resale or moving in. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. But there are also many REOs that are not good buys and may lose money.
Ready to make an offer?
Most banks have staff dedicated to REO that you'll work with while buying REO property from them. Usually 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 find out 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 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 hidden damage and retract the offer if you find it. As with making any offer on real estate, your offer may be more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender.
Once you've submitted your offer, it's customary for the bank to respond with a counter offer. At this point it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Be aware, you'll be contending with a process that generally involves several people at the bank, and they don't work evenings or weekends. It's typical for there to be days or even weeks of going back and forth. Prudential Douglas Elliman Real Estate is accustomed to these situations and will work to ensure there are no undue delays.
Look carefully at the listing and sales prices of similar properties in the neighborhood when making an offer on an REO. And factor in any repairs or remodeling necessary to prepare the house for resale or moving in. It is possible to find REOs with money-making potential, and many people do very well flipping foreclosures. But there are also many REOs that are not good buys and may lose money.
