Commonly Asked Questions About Foreclosure Properties
What is an REO?
An REO, or real estate owned, is a property that goes back to the mortgage company after an unsuccessful foreclosure auction. Most foreclosure auctions do not even result in bids. After all, if there was enough equity in the property to satisfy the loan, the owner would have probably sold the property and paid off the bank. That is why the property ends up at a foreclosure or trustee sale.
What happens during a foreclosure sale?
Foreclosure sales begin with a minimum bid that includes the loan balance, any accrued interest, plus attorney’s fees and any costs association with the foreclosure process. In order to bid at a foreclosure auction, you must have a cashier’s check in your hand for the full amount of your bid. If you are the successful bidder, you receive the property in “as is” condition, which may include someone still living in the property as well as the existence of liens against the property.
Since what is owed to the bank is almost always more than what the property is worth, very few foreclosure auctions result in a successful sale. Because of this fact, the property “reverts” to the bank where it becomes an REO, or real estate owned property.
What happens to a foreclosure property after the bank takes over?
The bank now owns the property and the mortgage loan no longer exists. The bank will handle eviction of the homeowner or tenants and may do some repairs. The bank will then negotiate with the IRS for removal of tax liens and pay off any homeowner association dues. As a purchaser of an REO property, the buyer will receive a title insurance policy and the opportunity to investigate the property.
Are there any risks to buying a foreclosure property?
It’s important to keep in mind that a bank owned property might not be a great bargain in every case. Make sure to do your homework before making an offer. Make sure that the price you pay (if you are successful) is comparable to other homes in the neighborhood. Consider the costs of renovation, including time to complete them. Do not get caught up in a “bidding war” and pay over market value.
Talk To Us If You Have Further Questions
The lawyers at Barli & Associates LLC have extensive experience handling foreclosure properties and can address a myriad of related real estate matters. If you’re considering purchasing a foreclosure property, we encourage you to contact our firm for guidance. We will provide you with the legal counsel required to properly negotiate and successfully purchase an REO property.
To schedule a free initial consultation, contact our law offices in Clifton or Tenafly by email or by phone at 973-638-1101. An attorney will handle your case directly from beginning to end. After-hours appointments are available and we accept credit cards. We serve clients in the New Jersey counties of Passaic, Bergen, Essex and Hudson.