Real Estate Owned (REO) Properties

A home that has gone through foreclosure process but was not purchased during the foreclosure auction, reverts back to the bank. It then is known as a real estate owned property, or REO.

Although these homes typically don’t involve incredible savings, there are distinct advantages to purchasing a real estate owned property. Here is a list of REO benefits:
•    The property is free from tax or other property liens. Once the bank owns the property, it does all the proper negotiations to free the home from all claims against it.
•    REO homes are usually vacant. The bank has already gone through the eviction process, which takes that responsibility off of you.
•    Foreclosures may need extensive repairs. REOs have usually been through the fixing up stage as well which makes it ready to move into or resell.
•    If repairs do need to be made, the bank will make allowances for this by reflecting it in the selling price.
•    During times when the market is slow, an REO can often be picked up at a discounted price.
•    Lenders will generally accept less money down when you are purchasing an REO property. They will often pay the closing costs as well.

In order to save time and money, many banks try to offer REO properties to large investors in the form of real estate portfolios which include the purchase of a large number of properties at once. This is where the substantial savings to an investor come into play. If you are in the position to purchase several properties at once, this may be a viable option for you.

In today’s real estate market (while there are plenty of REOs available) you may be able to take advantage of a good deal…even when purchasing an REO as a single home purchase.

One thing to keep in mind is that REO properties are sold ‘as is.’ Never consider investing in a bank owned property without using a qualified home inspector. You’ll need to make a realistic assessment of all repair work involved, both major and minor. Obtaining a home inspection can sometimes help you to leverage a better price when going through the offer/counter-offer process with the bank.  Submit all repair estimates with your counter offer to increase the chances of your offer being accepted.

Also expect the entire process of purchasing a real estate owned property to take longer than buying from a homeowner. Each offer and counter offer that is made must be approved by several bank personnel before getting back to you. This process can take weeks or longer, depending on how many counter-offers are involved.
If you do your homework and take the time involved in purchasing a real estate owned property, you can come out on the winning end of the deal.