Bank owned REO properties are a hot commodity these days. REO is an acronym for "real-estate owned." It is an attractive option for investors and home buyers looking to get hold of a prime property on the cheap for much less than the market valuation for a non-distressed property.
It might be helpful to find out how REOs come on the market and why they're better as compared to other real estate investments. Not to mention exactly what things need to be considered while buying these distressed homes. In general, an REO property is designated as such once it reverts back to the lender even after an auction. For instance, there may be no bids placed by anyone else at a foreclosure auction, or the lender's bid is the highest one.
The lender, in this case, may be a mortgage lender or bank. It can also be an insurer underwriting a loan that has foreclosed on the property. Another possibility is that it is a government agency that took possession of the property after placing a lien on it to collect a tax debt, legal award or other debts.
This process went into hyperdrive after the real estate market crashed in 2007-08, with millions of homes ending up foreclosed and subsequently as REOs in the possession of lenders. A huge number are in a handful of the hardest hit states such as Florida and California. Pick a state, and work from there to narrow it down to a suitable distressed property within a specific region, county or municipal limits.
The best way to do this is to start contacting the major mortgage lenders and banks that have physical branches or offices in the desired location. It's likely they will all have website listings of available REOs and foreclosed homes that are up for auction. Alternatively, this information can be obtained from their loss mitigation division or from the consultant firm handling their foreclosures and seized asset disposal.
Each bank or lender has its own rules and regulations regarding sale of REOs. As far as the buyer is concerned, the same due diligence (title search, valuation, etc.) is required as buying a traditional non-distressed property. An inspection is a lot more essential in this case because it'll be a vacant property requiring extensive repairs in order to make it suitable for moving in.
Also note that lenders will want to sell it off "as is, " and the cost of the repairs is usually borne by the buyer. Factor this into the total purchase cost before making an offer for the place. Most banks and lenders selling REOs make it easy for the new buyer to apply for financing that covers the full purchase price.
Easy financing plus a below market price makes bank owned REO properties an attractive option. It is possible because the lender is not a real estate investor, per se. Their primary concern is liquidating the asset and closing the books on the unpaid mortgage balance that led to the foreclosure. They will therefore be willing to let it go for anything that is close to the sum owed, even if it is far less than the market valuation of a similar but non-distressed home in the same neighborhood.
It might be helpful to find out how REOs come on the market and why they're better as compared to other real estate investments. Not to mention exactly what things need to be considered while buying these distressed homes. In general, an REO property is designated as such once it reverts back to the lender even after an auction. For instance, there may be no bids placed by anyone else at a foreclosure auction, or the lender's bid is the highest one.
The lender, in this case, may be a mortgage lender or bank. It can also be an insurer underwriting a loan that has foreclosed on the property. Another possibility is that it is a government agency that took possession of the property after placing a lien on it to collect a tax debt, legal award or other debts.
This process went into hyperdrive after the real estate market crashed in 2007-08, with millions of homes ending up foreclosed and subsequently as REOs in the possession of lenders. A huge number are in a handful of the hardest hit states such as Florida and California. Pick a state, and work from there to narrow it down to a suitable distressed property within a specific region, county or municipal limits.
The best way to do this is to start contacting the major mortgage lenders and banks that have physical branches or offices in the desired location. It's likely they will all have website listings of available REOs and foreclosed homes that are up for auction. Alternatively, this information can be obtained from their loss mitigation division or from the consultant firm handling their foreclosures and seized asset disposal.
Each bank or lender has its own rules and regulations regarding sale of REOs. As far as the buyer is concerned, the same due diligence (title search, valuation, etc.) is required as buying a traditional non-distressed property. An inspection is a lot more essential in this case because it'll be a vacant property requiring extensive repairs in order to make it suitable for moving in.
Also note that lenders will want to sell it off "as is, " and the cost of the repairs is usually borne by the buyer. Factor this into the total purchase cost before making an offer for the place. Most banks and lenders selling REOs make it easy for the new buyer to apply for financing that covers the full purchase price.
Easy financing plus a below market price makes bank owned REO properties an attractive option. It is possible because the lender is not a real estate investor, per se. Their primary concern is liquidating the asset and closing the books on the unpaid mortgage balance that led to the foreclosure. They will therefore be willing to let it go for anything that is close to the sum owed, even if it is far less than the market valuation of a similar but non-distressed home in the same neighborhood.
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