What are REO Properties?
Real-estate owned or REO properties are bank-owned or repossessed properties. Despite the name, they are not owned by realty companies.
When a homeowner fails to pay their mortgage, the home goes into foreclosure. If the owner never gets the money and the property doesn’t sell at auction, the bank takes ownership. At this point, the property would become an REO property.
The lender may also accept the deed as payment for the mortgage. This would skip the foreclosure process and make the property bank-owned right away.
Who Buys REO Properties?
REO’s are especially attractive to home resellers, or “house flippers”. Banks deal with money, not buying and selling homes. They are only trying to make up their loss on the mortgage. Since the bank is eager to sell the home, they will often let it go below market value. This provides an opportunity for property investors to turn a profit.
REO’s may also be a good choice for prospective homeowners looking for a “good deal”. Some lenders even offer renovation mortgages. This allows borrowers to get the money for the home and the renovation expenses all at once. If you’re a little handy yourself, or you’re looking for a deal on a fixer-upper, REO Properties may be a great choice.
Banks may also offer incentives like special financing or include furniture and appliances. Make sure to ask about anything they can do to sweeten the deal. Some banks may list the property as low as 30% below market value. A great REO agent, like one of ours, can help you choose a property and negotiate the best deal possible.
What is the Advantage of REO?
Buying an REO property can be better than trying foreclosure auctions. A big advantage is that you can have an REO property inspected before you buy it. You would have to buy sight-unseen at a foreclosure auction. By inspecting before the sale, you can have an estimate of what it will actually cost in the long run. You will know what repairs may be necessary and how much they might cost. In this consideration, REO’s are safer to buy than those in a standard foreclosure auction.
House flippers are usually saddled with many problems in their line of business. Dealing with REO’s can do away with some of these problems. There is one great advantage with REO’s; they have clear titles. Taxes of REO’s are already paid and their occupants are already out of the way. This spares the investor from future cumbersome headaches.
Nowadays some lender banks hire an REO asset management company. Companies like ours handle the marketing aspects of REO’s. We assist in finding, purchasing, selling, and managing REO properties for investors.
How Do I Buy REO Property?