An REO can also be referred to as a property that is still owned by the bank, after it was not sold at a foreclosure auction. This would be the last attempt to collect the debt on the home. Now that the bank is the sole owner of the property, they want to get it sold immediately to satisfy the debt that is owed on the home. If you are someone who is looking to make an investment into property, this might be the right buy for you. As with any sale, you want to do as much homework as possible before taking the plunge into your investment.
Always talk with a licensed Real Estate professional before purchasing your REO. The agent can always help you to find the best deals for your REO purchase. The agent will work with you to find homes that homes with the best deals. They will probably tell you to look at only the homes that held Conventional loans. Why you ask? This is because the home is being sold at a really low cost, opposed to what the bank bought it for, in turn profiting you a lot more money, than lets say a home with a federally backed loan such as a VA or FHA. Those are often times dangerous, because the government owns the loan, so to speak, which means they can take it away at any time if certain guidelines are not met. An agent will help you to find an REO with the best equity in the home. You want to make sure that the home of your choice does not hold any liens, because once you purchase the house, you are responsible for these liens. Another important thing is to hire a contractor or inspector upon purchase, to make sure there are no major damages to the home. Once you take possession, the home is your responsibility and there is nothing the bank can do to help. That’s why doing your homework is so extremely important.
Just like any other investment, purchasing an REO from the bank can be a great thing to improve your future and knowledge of the Real Estate and Investing Business. You should never go into a purchase like this, no matter how cheap the home is, without knowing everything that you need to know about the financials of the home, as well as anything major that may cause you problems in the future. Don’t be blinded by a great deal. Always remember to do your homework, because there is a reason the house is still on the market, this is just a quick way for the bank to unload the home from their inventory and collect on at least some of what is owed. Time is money, after all. And the faster they can push the house the better. Work together with your agent to make sure you will profit from this in the end. As long as you know what you are getting into, you will be on your way to a great investment into your future.
Once purchasing the home, making your profit, you can decide if this is something that is a good fit for you. Investing in REO’s can be very lucrative if don’t with the right amount of knowledge and caution. Remember, the bank just wants their money on the home, so do ALL of your homework before making that big investment.