An REO is a “Real Estate Owned” property that has been through the foreclosure process, and has been purchased at the foreclosure auction by the lender. Often the lender is forced to take a property to the auction to eliminate or “extinguish” junior liens against the property, otherwise the lender would have to assume the responsibility off paying of these junior liens if the homeowner gave the lender a “Deed in Lieu of Foreclosure” and walked away.
When a property didn’t get a good bid during the foreclosure process, the property is taken by the lender, most of the time, the banks, and the property is referred to as Real Estate Owned.
The bank clears and prepares the title of the property and make it available for resale thru the help of real estate agents.
A property can be foreclosed due to the failure of the owner to pay the mortgage. After the foreclosure process, the bank can take back the property and calls it as Bank REO.
One disadvantage of buying REO property is that you as the buyer will shoulder the expenses for the repair of the property as these properties are sold in “AS iS” condition.
It is fearful for those intending to buy REO property that previous owner would cause them trouble after buying the property. But the bank or mortgage company can assure the buyer that the previous owner has no legal rights over the property and they can report any misconduct if ever.
REOs are a great investment as long as you have a clear understanding of what exactly it is that you are getting into. Simply put, the bank wants to dispose off these homes, and if you manage to find the right property and are prepared to make a serious investment, it can prove to be a great way to take your successful plunge into the real estate investment business.
REOs arent hard to find because banks want to get rid of them as quickly as possible, and advertise them to the best of their ability. Investors simply need to inspect the property to be sure it is something that they can repair and still profit from if they want to. Many homes become REOs because they are not in a desirable part of town, so the investor that is looking into an REO must be sure that the home is in a desirable part of town if they hope to get their money out of it.
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