You have probably heard the term real estate owned, but do you know what it means? Real estate owned, also known as REO, is a type of property ownership wherein the lender repossesses a property after a failed foreclosure auction or when no short sale was made.
Why do properties fail to sell at foreclosure auction?
As you may already know, bidders are not always enthusiastic about purchasing foreclosed properties especially if the initial bid is higher than the actual value of the property. This normally happens to foreclosed homes that were upside down on their mortgage. The starting bid for the property will normally cover the balance on the property.
You need to understand that lenders would want to recover the expenses and possible they incur in foreclosing the property. This means that the minimum bid will not only include the balance of the mortgage. This will also cover the expenses incurred for foreclosing the properties like the payment for the lawyers and such.
Can you purchase an REO?
Yes. When the auction is unsuccessful, the property ownership goes to the mortgage company. They will need to sell the house because it will not serve them any good keeping it. They will eventually find a buyer for the property. To do that, they will have to make the essential repairs. They will no longer consider the losses or expenses incurred during foreclosure or the balance on the mortgage. An appraiser will determine the value of the property.
How to buy an REO?
If you want to buy an REO, then you might be in luck as there are several in the market today. This is super easy when working with an agent as he has access to various lists. As mentioned earlier, banks or mortgage companies would want to sell these properties. This means that it will be easier for them to locate the said properties. You can also inquire from the lenders such as the banks or other mortgage companies. They may provide you with the list of their inventory.
You can also start your search online. Most lenders would post their REO properties online. This is very convenient too because you do not have to leave home or wait for the realtor to come up with the list. You can do it yourself at your own time and pace.
Once you have narrowed down your search, you can call the mortgage company and ask about the property you are considering to buy. If the price is not indicated, ask the lender upfront to ensure that it is within your price range. Do not forget the location of the property and research about the area. You should also ask about the condition of the property and set an appointment for you to see it.
You can expect anything from the REOs. This is why you have to see the property first before deciding to purchase it. check the essentials as you would when purchasing a regular property. There are great REOs. However, you still have to be diligent when looking for a property to purchase. some have been neglected and you do not want to be investing in battered property.