What To Expect with Bank REOs
“Real Estate Owned” property or REO are properties that has been through the foreclosure process, and has been purchased at the foreclosure auction by the lender. REO properties can be bought below market value. REO properties are properties that are own by a bank.
The property is taken to an auction to free the lender from junior liens. Otherwise, the lender take the responsibility of paying these junior liens.
In order to do well with REO investing, one need to have a better understanding of how this work. It’s how they deal and how much they know that makes a difference in landing a good deal.
The thing about this kind of setup is that the investor must buy all of the homes in a package – whether they are vacant lots, burnouts, or condemned. AND – they are not in one location but spread out all over the country.
That’s why the average price per home is so cheap…to spread the risk. But, these homes have all been in an MLS system somewhere – they were all REO properties at one time – so there is a way to find the market value pretty easily.
The bank is losing money for properties on their possession. For this reason, they would want to take these properties off their hands as soon as possible and might accept an offer below the current market value of a property.
One good thing about buying an REO property is you get to inspect it before giving a final offer. This way, the buyer can assess the necessary repair to be done and calculate the expenses needed.
Most banks have REO properties and will love to sell them. Bringing REO properties up to date can be a bit more challenging in some cases. One reason for this is when you buy a REO properties you buy it as is.
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