Home buyers are frequently looking for a good deal on a house. Whether they are upgrading, investing or buying their first homes, those in the market for real estate know that foreclosed and real estate owned (REO) properties provide the prospect to get a good deal on a home. They are not the same type of property, however. Real estate owned property is property that the bank has repossessed from a distressed homeowner and either decided not to sell through foreclosure or failed to find a buyer for at a foreclosure auction. The lender then sells the house as its new owner outside of the foreclosure course. A foreclosure, on the other hand, is a property that is being sold to pay the balance the homeowner owes. Each state deals with foreclosure sales uniquely, but these properties are typically sold at auction to the the entity that places the highest bid. The starting bid at a foreclosure auction incorporates all that is to be paid on the property, the accrued interest, and the attorney bill associated with the sale.
Distressed homeowners usually face other types of financial challenges outside their failure to pay their mortgages. Often they will add to the amount of debt they have on the home in order to try to fix their problems. They also frequently owe unpaid taxes on the home by the time it winds up in foreclosure. For this reason, the beginning bid at a foreclosure auction may be more than the property is estimated to be worth, which causes many auctions to be unsuccessful in bringing in a winning bidder. The banks are then motivated to turn the property into a real estate owned property and sell it at a later date. Typically, REO properties go for up to 20 percent of their current market value. Prior to purchase, buyers need to examine the property and comparable properties in the district to make sure they are getting a good price.
A REO sale is considered one of the safest types of real estate deals, since the seller is a bank, not an individual. Unlike foreclosures, REO homes do not carry the added weight of liens or back taxes that the new owner will be responsible to pay. Also, buyers can see REO properties before purchasing them, bargain on the price to accommodate the need for repairs and still get the home for a great deal in many instances. On the other hand, buying a foreclosure sometimes represents a solid investment, because the home’s current owner may wish to reside in the home as a renter. This means the home comes with tenants, allowing its new owner to start making money right away. When purchasing a foreclosure at auction, the buyer will conclude that the bank that handles the loan on the property is more than willing to speed up the financing process in order to discharge the burden of the home. If a home does not have a lot of debt against it, buying it through a foreclosure auction offers the best chance to get a good deal. The vital aspect is researching what is owed on the home before bidding at an auction if you are looking to find a good deal.
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