| What is an REO? REO means Real Estate Owned. | | | | affect the sale price. A buyer will generally be more |
| Everyone is talking about REOs these days. But | | | | likely to get a lower price when purchasing a home in |
| before you consider buying one, there are a few | | | | the pre-foreclosure or auction stage. |
| things you should know about REOs. These properties | | | | Let's say now you've decided you want an REO. You |
| are generally owned by banks, credit unions, mortgage | | | | should know there are risks associated with this "great |
| companies and sometimes private companies. It has | | | | deal" you are getting. When considering your REO |
| become increasingly common for the news to report | | | | purchase, make sure you have access and contact |
| foreclosure issues and homeowners losing their | | | | information for various experts who will guide you in |
| houses and other effects of the mortgage crisis. As a | | | | the inspection process. |
| result there have been dramatic increases in the | | | | You will need a Realtor, who can protect your |
| marketing of REOs to the general public. It used to be | | | | interests and make sure you get the best deal |
| that you could barely get your hands on lenders' | | | | possible. Your Realtor will be able to generate reports |
| foreclosure lists. But these days, everyone is trying to | | | | for you showing comparable sales prices which will |
| sell REOs. | | | | enable you to assess whether the asking price for the |
| The people that are being marketed by these REO | | | | REO you are considering is appropriate. There are |
| sellers are mainly first-time and minority potential | | | | some statistics that show the average price of an |
| homebuyers. Fannie Mae works with many companies | | | | REO is 15 - 30 percent lower of comparable sales |
| to help these types of homebuyers realize the | | | | prices. However, there are REASONS for this. |
| American Dream of owning your home using | | | | REOs are sold AS-IS. This means that what you see |
| reasonable and affordable loans. There has been a | | | | is what you get. You will need a qualified home |
| shift in the industry from marketing REOs to those | | | | inspector to guide you with this step of your REO |
| who "flip" houses to first-time homebuyers. The | | | | purchase process. Only a qualified inspector will be |
| dramatic increase in foreclosures has left many | | | | able to reveal latent flaws or issues that you will need |
| lenders with high inventories of REOs, resulting in | | | | to consider before you purchase the REO. You will |
| potentially advantageous opportunities for individuals | | | | need to factor in the costs of potentially repairing, |
| who never has access before, to gain access to the | | | | replacing or rehabilitating the necessary sections of the |
| real estate market. Additionally, the number of | | | | property into the price you will be paying. |
| foreclosures is allowing simple real estate investors to | | | | REOs take longer. When purchasing an REO, you are |
| diversify and expand their portfolios. | | | | not dealing with Joe and Jane Smith homeowner, you |
| There are many laws regarding foreclosures and the | | | | are dealing with either a Bank or an Investment |
| process. Mainly, when the property is in the | | | | Company. The decision making and sale approval |
| pre-foreclosure and auction stage, the bank (owner) is | | | | process in a business takes much longer than with |
| only legally entitled to its losses and expenses. This is | | | | individuals. It could take weeks to get an approval on |
| to say that the bank (owner) is not entitled to gain a | | | | your offer. Additionally, even though most banks will |
| profit from the sale. This changes however, after the | | | | remove tax liens and occupants (if need be) from the |
| property has been foreclosed on it becomes an REO. | | | | property, in order to protect yourself, you should |
| REOs are often considered to be fabulous starter | | | | perform a title search. Now you may not personally be |
| homes because the sales prices for these properties | | | | able to do this, which is why you will hire a company to |
| is generally lower than that of a similar non-REO | | | | perform such a search for you, and the results may |
| property. In today's market however, this may not | | | | take up to a week to review. Another potentially |
| always be the case. This is mostly due to the fact of | | | | time-consuming process is getting an appraisal. As a |
| the number of such properties in the market. Even | | | | buyer, you should not trust the seller's appraisal blindly, |
| though a property is an REO, it does not mean that | | | | get your own! Any time or money you spend |
| the owner will not make a profit off the sale. | | | | beforehand may well be worth it in the long run. You |
| Remember, after the foreclosure process, the REO | | | | want to know that you are getting what you are |
| owner is now allowed to make a profit, which may | | | | paying for! |