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’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.
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.
After the real estate bubble popped in 2007-2008, this process of homes with untenable mortgages going into foreclosure and turning into REOs became much more ubiquitous. Millions of homes were foreclosed by the banks in Florida, California and other states that were hit hard. There is a large inventory of homes still available in these states, and it’s quite easy to identify distressed properties in a specific area, city or municipality.
The simplest method is to check with all the banks and mortgage lenders that have offices and branches in the region. The bigger ones will have web listings of foreclosed properties and REOs that are up for sale or auction. If not, get in touch with their loss mitigation department or a consultant firm that has been hired to handle all the foreclosures, auctions and sale of seized assets.
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.
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.
You can visit the website agamproperties.com for more helpful information about Buyer’s Guide For Bank Owned REO Properties
