Buying a foreclosure or REO property in Boulder?

What’s an REO?

“REO” is Real Estate Owned. These are houses which have been through foreclosure that the bank or mortgage company presently holds. This is unlike 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 prepared to pay with cash in hand. And on top of all that, you’ll accept the property 100% as is. That might include existing liens and even current residents that may require removal.

A bank-owned property, on the contrary, is a much cleaner and attractive deal. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The lender will take care of 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.

Take notice that REOs may be exempt from typical disclosure requirements. For example, in California, banks are not required to give a Transfer Disclosure Statement, a document that typically requires sellers to disclose any defects of which they are informed. By hiring Duane Duggan, Re/Max of Boulder, Inc., you can rest assured knowing all parties are fulfilling Colorado state disclosure requirements.

Am I guaranteed a bargain when buying an REO property in Boulder?

It’s sometimes believed that any REO must be a good buy and an opportunity for easy money. This isn’t necessarily true. You have to be prudent about buying a REO if your intent is profit from the sale. Even though the bank is often eager to sell it soon, they are also motivated to get as much as they can for it.

Look carefully at the listing and sales prices of similar homes in the neighborhood when considering the purchase of 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 buying foreclosures. However 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 while buying REO property from them. To get their properties advertised on the local MLS, the lender will usually use a listing agent.

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 their knowledge regarding the condition of the property and what their process is for accepting offers. Since banks almost always 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 unknown damage and retract the offer if you find it. If, as a buyer, you can provide documentation showing your ability to pay, 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 type of real estate offer.)

After you’ve presented your offer, you can expect the bank to make a counter offer. Then it will be up to you to decide whether to accept their counter, or submit another counter offer. Be aware, you’ll be working with a process that probably involves several people at the bank, and they don’t work evenings or weekends. It’s not uncommon for there to be days or even weeks of going back and forth. Duane Duggan, Tammy Milano and Timmy Duggan with the Boulder Property Network at  Re/Max of Boulder, Inc. are accustomed to these situations and will work to ensure there are no undue delays.