As a property investor, I am often asked what does REO mean when buying real estate for sale? An acronym for ‘real estate owned’, REO refers to foreclosure property repossessed by mortgage lenders. When foreclosure real estate does not sell through public auction it returned to the lender, who in turn lists the property for sale through an assigned realtor.
A second question buyers ask is what does REO mean in terms of buying houses at discounted prices? Most bank owned homes are sold slightly below market value. Since properties are sold in “as-is” condition, banks consider home repair costs and adjust prices accordingly.
Although REO homes are typically more expensive than houses sold through public auctions, overall they are actually cheaper. Most foreclosure properties require multiple repairs because foreclosed homeowners are financially incapable of properly maintaining the home.
Many properties sold through auctions have liens and judgments attached. In some cases, foreclosed homeowners continue residing in the home until evicted through the court system. All of these issues are resolved once the bank takes possession of the home. Buyers are able to purchase REO homes with a clean title and quickly take possession.
Real estate owned properties are sold through each bank’s loss mitigation division or designated realtor. Since banks have incurred foreclosure legal costs and fees associated with lien, judgment or tenant removal, there is little room for negotiating the asking price.
Bank owned homes can be a great option for first time home buyers, real estate investors, or individuals looking for an affordable vacation home. REO houses are perfect for use as rental houses or lease-to-own properties. Since bank owned foreclosures are priced below market value, investors can reap profits by rehabbing and flipping the house or offering seller carry back financing.
Buying bank REO properties can save investors and home buyers time and money. There is no need to spend time attempting to remove creditor and tax liens or commence with eviction action when tenants refuse to vacate foreclosure properties.
Time-consuming details are taken care of by the bank; allowing buyers to purchase the property at a discounted rate and quickly take possession of the property. Closing on a foreclosure home can take several months, while REO purchases can be expedited in a matter of weeks.
Many resources are available for locating real estate owned properties. Countrywide, Remax, Prudential and Bank of America publish bank owned foreclosure homes for sale directly on their company websites.
Many mortgage lender and realtor websites include additional resources to help borrowers further reduce the cost of buying houses through first time house buyer programs and government grants.
These are just a few options available for buying REO homes at reduced prices. The Internet offers an abundance of information to help home buyers and investors locate distressed properties. Local realtors often offer foreclosure seminars to help buyers understand the process of buying foreclosure homes through auction or bank loss mitigators.
Take time to conduct research, attend seminars or talk with real estate professionals to learn the ins and outs of buying REO real estate. Doing so can help you obtain exceptional real estate at significantly reduced prices.