As a real estate investor, I often get asked what REO means when buying real estate for sale. An acronym for ‘real estate ownership’, REO refers to properties owned by mortgage lenders. When the foreclosure is not sold at public auction, it is returned to the lender, who in turn lists the property for sale through the designated landlord.
The second question buyers ask is what does REO mean when it comes to buying discounted homes? Most bank-owned homes sell for slightly below market value. Properties are sold in “as is” condition, banks take into account the costs of home maintenance and adjust prices.
Although REO homes are more expensive than homes sold at public auction, they are generally cheaper. Most foreclosed properties require a lot of maintenance because foreclosed homeowners cannot afford to properly repair a home.
Many properties sold at auction have liens and judgments attached. In some cases, foreclosed homeowners live in the home until they are evicted through the court system. All these issues will be resolved after the bank takes possession of the house. Buyers can purchase REO homes with clean title and take possession quickly.
Real estate assets are sold through each bank’s loss mitigation department or through a designated realtor. Because banks incur legal costs and fees associated with foreclosure, judgment or tenant removal, there is little room to negotiate 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 homes are perfect for use as rental properties or rental properties. Because bank-owned funds are priced below market value, investors can reap profits by renovating and flipping the home or financing the seller.
Buying bank REO properties saves investors and home buyers time and money. There is no need to waste time trying to avoid creditors and tax liens or to initiate eviction proceedings when tenants refuse to vacate foreclosed properties.
Time-consuming details are taken care of by the bank; Allowing buyers to purchase the property at a discounted price and take possession of the property quickly. Closings on foreclosed homes can take months, while REO purchases can be expedited in a matter of weeks.
There are many resources for finding real estate properties. Nationwide, Remax, Prudential and Bank of America publish bank-owned 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 a home through first-time home buyer programs and government subsidies.
These are just a few options for buying REO homes at a discount. The Internet provides an abundance of information to help home buyers and investors find distressed properties. Local realtors often offer foreclosure seminars to help buyers understand the process of buying a home through auction or foreclosure.
Take the time to conduct research, attend seminars, or talk to real estate professionals to learn how to buy REO real estate. Doing so will help you find exceptional real estate at a huge discount.