| When someone says that a home or property is "real | | | | a close, the buyer who is willing to wait for this point in |
| estate owned" they usually describe it as REO. When | | | | time will not have to deal with the legal and emotional |
| someone says REO foreclosures, they are usually | | | | difficulties of evicting the former owners from the |
| discussing properties already through the entire | | | | premises (and this is a very common occurrence). |
| foreclosure and auction process, and back in the | | | | They will also be able to head into the home with a |
| hands of the bank or lending company. | | | | licensed inspector to ensure that there are no |
| So a home that is in the midst of a foreclosure is not | | | | undiscovered or undisclosed issues with the property |
| an REO property? No, the foreclosure process is a | | | | as well. Often a property in the midst of foreclosure is |
| lengthy legal period that usually involves the bank | | | | unable to receive a comprehensive inspection, and this |
| working with the borrower to try to formulate some | | | | might lead to it being unsuitable for financing without |
| way in which the foreclosure can be avoided. The | | | | the potential owner paying for such things in advance. |
| bank will then usually offer the property up for auction | | | | For example, if a home has evidence of a termite |
| at the amount due on the loan, and if this is not bid | | | | invasion at some point in time, most banks will not draft |
| during the auction, the property is then reclaimed by | | | | the formal mortgage or purchase agreements until a |
| the bank. | | | | chemical treatment has been completed. Neither a |
| Currently, there are hundreds of thousands of active | | | | seller nor a bank is going to be obliged to do this, and |
| foreclosures, and even more homes in the hands of | | | | so a potential buyer would need to pay for this if they |
| the banks. Because of this many banks are creating | | | | wanted to move forward with the purchase. Of |
| rental agreements with the former owners that allow | | | | course, this could run into the thousands of dollars, and |
| them to remain in the home, but which makes them | | | | a home may not be worth such a risk if it is strictly an |
| aware that they will have to vacate when the | | | | investment property. Such a thing would only be |
| property is once again sold. | | | | discovered after a proper inspection. |
| Now, many people are torn over when to step in a | | | | The final benefit of waiting for the foreclosure period |
| buy a home - when it is in the foreclosure period, or | | | | to end before making an offer on any REO |
| once it becomes one of a bank's REO foreclosures. | | | | foreclosures is that the bank might be more than |
| The answer is difficult to determine, but there are | | | | happy to extend extremely generous terms on the |
| some notable benefits to waiting for the process to be | | | | loan, such as a low down payment or low rate of |
| completed and then making an offer. | | | | interest, in order to convert it to an income-earning |
| Even though the home is going to be reassigned with | | | | asset on their books. |
| the true market value after the foreclosure comes to | | | | |