Bank owned REO properties are a much sought after commodity nowadays. REO in this case stands for real-estate owned. Finding such a property makes it possible for home buyers and investors to buy valuable properties for much less than the market value.
It's important for buyers to understand how banks end up with REOs and why it's such a good deal. It is also a good idea to get hold of a checklist of things to do when buying a distressed property. The REO classification kicks in when the home is still in the lender's possession even after an auction. This is usually the case when the lender's bid is the highest, or if no one else bids on it.
Lenders here may be banks or mortgage lenders. Some are even insurers on the hook because they underwrote the loan. Sometimes, government agencies may end up holding REOs after placing liens to recover taxes and other dues from citizens and businesses.
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 and easiest method is to check the website of major mortgage lenders and banks that have branches within the desired area. Most have public listings of currently available REOs and foreclosed properties coming up for auction, all neatly categorized by city and county. The information may also be obtained by contacting the lender's loss mitigation department or a consultant firm charged with disposing off all the foreclosed properties in the lender's possession.
There are no general rules that apply to all REOs, so each bank has its own way of selling them. As far as buyers are concerned, think of it like any other property investment. Do the same due diligence, including an independent valuation and a title search. One key requirement is an inspection of the home, because most distressed homes will have fallen into disrepair.
For their part, lenders just want to get the property off their hands as is. The repair costs are therefore the responsibility of the buyer, and this must be factored in before deciding on an offer price. Financing for REOs is often a lot easier. The lender holding it will quickly approve mortgage proposals that seek 100% of the sale price in order to close the deal.
Banks stuck with REOs have no interest in holding on to a property as an investment. The banker's sole concern when it comes to bank owned REO properties is to liquidate the asset and recover the sum owed by the original borrower. The unpaid balance on the mortgage is therefore a good marker for setting the asking price, regardless of what the market value of a similar non-distressed property would be.
It's important for buyers to understand how banks end up with REOs and why it's such a good deal. It is also a good idea to get hold of a checklist of things to do when buying a distressed property. The REO classification kicks in when the home is still in the lender's possession even after an auction. This is usually the case when the lender's bid is the highest, or if no one else bids on it.
Lenders here may be banks or mortgage lenders. Some are even insurers on the hook because they underwrote the loan. Sometimes, government agencies may end up holding REOs after placing liens to recover taxes and other dues from citizens and businesses.
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 and easiest method is to check the website of major mortgage lenders and banks that have branches within the desired area. Most have public listings of currently available REOs and foreclosed properties coming up for auction, all neatly categorized by city and county. The information may also be obtained by contacting the lender's loss mitigation department or a consultant firm charged with disposing off all the foreclosed properties in the lender's possession.
There are no general rules that apply to all REOs, so each bank has its own way of selling them. As far as buyers are concerned, think of it like any other property investment. Do the same due diligence, including an independent valuation and a title search. One key requirement is an inspection of the home, because most distressed homes will have fallen into disrepair.
For their part, lenders just want to get the property off their hands as is. The repair costs are therefore the responsibility of the buyer, and this must be factored in before deciding on an offer price. Financing for REOs is often a lot easier. The lender holding it will quickly approve mortgage proposals that seek 100% of the sale price in order to close the deal.
Banks stuck with REOs have no interest in holding on to a property as an investment. The banker's sole concern when it comes to bank owned REO properties is to liquidate the asset and recover the sum owed by the original borrower. The unpaid balance on the mortgage is therefore a good marker for setting the asking price, regardless of what the market value of a similar non-distressed property would be.
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