I wanted to share an article that I recently read by Troy Fowler that address's REO Properties and Auctions that may help shed some light.
REO's and Working With Financial Institutions...
An REO (Real Estate Owned) is a property that goes back to Lender after an unsuccessful foreclosure auction. Most foreclosure auctions result in adequate bids. Typically there is rarely enough equity in the property to satisfy the loan(s) full repayment.
With regard to REO properties, the bank now owns the property and the mortgage loan no longer exists. The bank will handle the eviction, if necessary, and may manage some of the repair process. They will typically negotiate with the IRS for removal of tax liens and pay off any homeowner's association dues.
Each bank/lender manages the REO process based on guidelines that are individually defined, but they all have similar goals. They want to get the best price possible and have often negotiated to achieve the highest possible price. However the market and expectations of asset managers may vary as inventories have swelled and markets have slowed. Generally, banks have an entire department set up to manage their REO inventory.
Generally, banks have an entire department set up to mange their REO inventory.
Banks always desire to sell a property in an "as is" condition. You may choose to obtain professional inspection services companies to determine the condition of the property. This is usually done to assist a potential bidder to better understand the highest price they are willing to offer based on the property condition.
Your offer should include an inspection contingency to ensure that your offer represents the best interest and appropriate price for both parties.
Banks are increasingly partnering with auction houses to offer multiple properties though the auction process. Depending on the property, location, condition, numbers of bidders etc. This is an excellent alternative to find great deals in purchasing real estate.
The auction Method Advantage
Choosing the auction method actually allows a property owner a specific timeline for selling real estate. In today's slowing real estate marketplace, having the option to spotlight your property and maximize visibility is a critical benefit to getting it sold. It is by far the best possible method of attracting as many possible bidders on a single day and using a competitive bidding process to achieve the highest possible sale price. Buyers act on your schedule by complying with the terms, conditions and sale date of the auction.
They are committed to sale on a specific date; therefore, they conduct their due diligence in advance and are prepared to bid on the day of the sale. Closings typically never exceed 45 days beyond the sale/auction date, offering you a complete timeline from the minute you agree to move forward. Whether your property has been on the market longer than you expected, you wish to avoid a long drawn out sales and negotiation process, or are just ready to make that move that will enable you to move forward on your schedule.