| With the recent housing crisis in the United States, | | | | in California there is a 90-day default period that every |
| many investors have seized opportunities to increase | | | | homeowner is entitled to followed by a 23-day period |
| their real estate profits through purchasing distressed | | | | before the property actually goes to sale. In certain |
| properties. Many new investors have also discovered | | | | situations, the 23-day period can be, and often is, |
| that they can obtain properties for less than their | | | | extended. |
| market value and realize an incredible profit by reselling | | | | This means that if an investor has an eye on a |
| them. | | | | particular property, it can take up to four months, or |
| However, the question is often debated amongst | | | | longer, for that property to actually go to sale. Also, |
| veteran investors and newcomers alike, about what | | | | certain states offer a Right of Rescission or a Right of |
| kinds of properties are better, easier, and more | | | | Redemption to the homeowner, meaning that an |
| profitable to purchase. As most ultimately discover, it is | | | | investor may not ultimately get to keep the house |
| by far better to invest in REO properties than it is to | | | | even after purchasing it or the house may have liens |
| purchase real estate via short sale or foreclosure. | | | | on it. |
| Purchasing a property via short sale requires that | | | | In comparison, when buying an REO property, there is |
| multiple parties agree on the sale price and terms. This | | | | no lengthy waiting period, nor are there any liens or |
| means that before an investor can take control of a | | | | other issues that may prevent an investor from |
| property, the seller and the bank have to agree to the | | | | keeping the property. Also, REO's are listed on multiple |
| sale, which may or may not happen. The process | | | | listing services, meaning that they are as easy to find |
| involved in negotiating the sale can be lengthy and | | | | as other retail properties, whereas short sales and |
| there is a lot of time and paperwork invested before | | | | foreclosures often take special research in locating. |
| escrow is actually opened on a property. In short, the | | | | The process and time involved in buying an REO is |
| more parties that are involved in a deal, the less likely it | | | | similar to buying from a retail seller. One of the biggest |
| is to be finalized, the more work it takes to complete it | | | | values in buying REO properties, however, is that the |
| if it is finalized and far more time is invested overall. | | | | banks are anxious to get rid of them. Banks and other |
| On the contrary, when purchasing a bank owned | | | | lenders are not in the property management business |
| property, there are only two parties involved in the | | | | and have no interest in keeping the properties. In fact, |
| negotiations, which are the bank and the investor. More | | | | properties actually represent a liability in that they are |
| often than not, the bank is as anxious to sell the | | | | not drawing an income for the bank, and can quickly |
| property, as the investor is anxious to buy it. All of this | | | | succumb to deterioration or vandalism as they are left |
| helps to streamline the process and significantly | | | | unoccupied. Banks are, therefore, anxious to get rid of |
| reduces the amount of time it takes to complete the | | | | them and are prone to sell them for far less than their |
| sale. | | | | market value to expedite the process. All of these |
| In comparing the purchasing of foreclosed properties | | | | reasons clearly indicate that it is better, by far, to invest |
| to REO purchases, once again, REO purchases are | | | | in REO properties than it is to purchase real estate by |
| much easier and far less time consuming. For instance, | | | | foreclosure or short sale. |