"REO" or Real Estate Owned, are homes which have been through foreclosure and are presently owned by a bank or mortgage company. This is unlike a property 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 accumulated during the foreclosure process. You must also be willing to pay with cash in hand. To top everything off, you'll accept the property completely as is. That possibly will consist of standing liens or current residents that need to be evicted.
A bank-owned property is a more tidy and attractive option. The REO property didn't find a buyer during foreclosure auction. The lender now owns it. The lender will deal with 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.
You should be aware that REOs are not exempt from the State of Minnesota mandated disclosure requirements or additional requirements from the community the home resides in. However, a bank may not comply, will typically require that a buyer waive reciept of disclosures, will disclose that they do not have any information about the property, and will ask a buyer to accept the property in "as-is" condition. By hiring RE/MAX Results, I can help guide you in discovering facts about the property that will help you be able to make as informed a decision as possible.
Am I guaranteed a good deal when investing in an REO property in Minneapolis?
It is occasionally presumed that any foreclosure must be a good deal and an opportunity for easy money. This isn't necessarily true. You have to be prudent about buying a REO if your intent is make money. While it's true that the bank is typically anxious to offload it fast, they are also motivated to get as much as they can for the property.
When considering 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 moving in or resale. The bargains with money making potential exist, and many people do very well buying foreclosures. But there are also many REOs that are not good buys and may lose money.
Ready to make an offer?
Most lenders have a department dedicated to REO that we'll work with when buying REO property from them. Commonly the REO department will use a listing agent to get their REO properties listed on the local MLS.
Before making your offer, we'll want to contact the listing agent to discover what their process is for receiving offers. Since banks most commonly sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for hidden damage and retract the offer if you find unacceptable problems. If 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.) In some cases, a bank will require you to obtain a pre-approval letter from their own lender so they have extra confidence in your ability to purchase the property. You will not, however, be required to obtain your financing from the bank/owner, although you may be offered incentives to do so.
Once you've presented your offer, you can expect the bank to respond with a counter offer. At this point it will be your decision whether to accept their counter, or submit another counter offer. Your deal could be settled in a single day, but that's usually not the case. Since offers and counter offers usually allow a day or more for the other party to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer for negotiations to conclude.
Banks may also offer discounts to use their title company. However, I believe this is to be avoided, as the title policy provided may be less comprehensive in it's coverages than others available in the market. Since the property may have hidden title defects that came from the former owners financial difficulties, you'll want the most comprehensive policy available, even if it costs a little more.
You can search for foreclosure homes using the "Home Search" tab at the top of this page and clicking on the "More Options - Advanced Search" to specify the type of distressed property you are looking for.
