Making an offer on REO property or a foreclosure in Los Angeles?
What's an REO?
"REO" is an abbreviation for Real Estate Owned. These are properties which have been through foreclosure that the bank or mortgage company currently holds. 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 accumulated during the foreclosure process. The buyer must also be able to pay with cash in hand. And on top of all that, you'll get the property 100% as is. That possibly may involve prevailing liens and even current tenants that need to be kicked out.
A bank-owned property, conversely, is a much cleaner and attractive proposition. The REO property was unable to find a buyer during foreclosure auction. The lender now owns it. The bank will attend to the removal of tax liens, evict occupants if needed and generally organize for the issuance of a title insurance policy to the buyer at closing.
Note that REOs may be exempt from typical disclosure requirements. For instance, in California, banks are not required to give a Transfer Disclosure Statement, a document that normally requires sellers to make known any defects of which they are informed. By hiring Keller Williams Realty, you can rest assured knowing all parties are fulfilling California state disclosure requirements.
Is REO property in Los Angeles a bargain?
It's commonly assumed that any foreclosure must be a steal and an opportunity for guaranteed profit. This isn't necessarily true. You have to be very careful about buying a REO if your intent is make money. While it's true that the bank is often eager to offload it quickly, they are also looking to get as much as they can for it.
When contemplating what to pay for a foreclosure, you need to look closely at 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. It is possible to find REOs with money-making potential, and many people do very well buying and selling foreclosures. Still there are also many REOs that are not good buys and may lose money.
Time to make an offer?
Most lenders have a department dedicated to REO that you'll work with when buying REO property from them. To get their properties advertised on the local MLS, the lender will frequently hire 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 about the condition of the property and what their process is for taking offers. Since banks most commonly 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 hidden damage and cancel the offer if you find it. If, as a buyer, you can provide documentation showing your ability to secure financing, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This goes for any real estate offer.)
Once you've submitted your offer, it's customary for the bank to counter offer. Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Your deal could be final in a single day, but that's usually not the case. 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. Keller Williams Realty is are used to working around the schedules of this type of seller and will do everything possible to ensure there are no undue delays.
When contemplating what to pay for a foreclosure, you need to look closely at 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. It is possible to find REOs with money-making potential, and many people do very well buying and selling foreclosures. Still there are also many REOs that are not good buys and may lose money. 
