| O is real estate owned by the bank, and many | | | | home or property is an REO you have to wonder |
| investors consider an REO property to be money just | | | | exactly what IS wrong with it. The house was not bid |
| waiting to happen. An REO is different from a | | | | on because no one saw the worth in it. Did the home |
| foreclosure property in that the bank has already tried | | | | just not have enough equity? Were their IRS liens |
| to sell it at a foreclosure auction and has had no luck | | | | against it? Was the property just too badly damaged? |
| getting bids. Because the property was not bid on, the | | | | You need to ask these questions. If the bank cannot |
| bank then became the owner of the property. | | | | answer the questions then you need to be even more |
| Naturally, the bank does not want to keep the REO | | | | skeptical. Take advantage of your right to inspect the |
| any longer than possible, and this makes it a great | | | | REO so that you can see with your own eyes what |
| opportunity for an investor. Not every REO is a good | | | | may or may not be wrong, hire professionals if |
| deal, but when you look at an REO you’ll | | | | necessary as well. |
| commonly find that there is a lot of money to be | | | | One must also be sure that if they are purchasing an |
| made. | | | | REO to fix it up and sell it, that the property is located |
| So, is this a foreclosure? | | | | in a desirable part of town. If the home is not located in |
| Technically speaking, the home was foreclosed on | | | | a desirable part of town, you should really think about |
| because the owner of the home failed to make their | | | | how wise of an investment the property may be. |
| scheduled payments. The bank set up and went | | | | Perhaps location is why the property was not bid on |
| through a public auction, but there was not any bids | | | | at auction. There are three big things to consider when |
| placed on the home, so the bank ended up owing the | | | | dealing with any type of real estate and those are |
| property. Yes, the home was foreclosed on, but it is | | | | location, location, location. Never let a seemingly good |
| well past the foreclosure process and the bank will be | | | | deal let you lose sight of how important location is for |
| anxious to get rid of the property. | | | | any piece of real estate that you intend to sell. |
| Advantages of REO vs. Foreclosed Property | | | | Why the bank will sell an REO cheap |
| When you are thinking of buying an REO you have to | | | | Basically, a bank is not set up to deal with real estate. |
| distinct advantages that a buyer does not have with a | | | | Sure, they give loans to people, but really, they are not |
| foreclosed property. The first is that you are able to | | | | equipped to buy and sell real estate. Because banks |
| buy on your schedule, as you do not have an auction | | | | are not accustomed to dealing with real estate, it often |
| date to work with and around. You can make an offer | | | | takes them awhile to get the ball rolling so that they |
| of the home any time; you don’t have to wait | | | | can repair the property, and get an agent to sell the |
| for bidding to begin. Another big advantage of an REO | | | | property. What this means is that while the bank |
| compared to a foreclosed property is that you can | | | | attempts to get their business together they are losing |
| inspect it before you buy, when you cannot do this | | | | money hand over fist and the federal government |
| with the majority of foreclosed homes that you think | | | | often penalizes them for each and every REO that |
| about purchasing. Being able to inspect the property | | | | they acquire. |
| before you buy will let you know how big of a project | | | | Because the bank is loosing so much money on each |
| you will be dealing with. | | | | REO, they are willing to sell it fast and cheap. In fact, |
| Best types of REO to purchase | | | | banks commonly sell an REO property for around |
| You might not think the type of loan the home was | | | | 30% of its value just to be done with it. Sure, they end |
| purchased with the first time around matters but it | | | | up losing money on the deal, but they end up losing |
| does. You should attempt to purchase REO’s | | | | less if they sell cheap now than they would if they |
| that had a conventional loan the first time around, as | | | | kept the property for another six months while they |
| you will likely get much better deals with these than | | | | try to pull everything together so that they can sell the |
| you will if you look at FHA and VA loans. The federal | | | | property. |
| government backs FHA and VA loans, and the | | | | The great thing about working with the bank with an |
| government can actually buy them back if they are so | | | | REO is that you aren’t buying site unseen. |
| inclined. Homes that had conventional loans the first | | | | Because you can walk through the house and make |
| time are often purchased for just a fraction of their | | | | all the inspections that you want, you can deal with |
| value, meaning that they can make an investor a lot | | | | them in a way that will give you the best deal, and the |
| more money. | | | | bank will typically be happy with any serious offer |
| Which REO’s you should not purchase | | | | because it will get the house off of their hand and they |
| Just because the bank owns a property does not | | | | will stop losing money. |
| make it a good deal. In fact, when you see that a | | | | |