Do you want to know how to buy Bank Owned Properties (REO)? Part 1 in a series
Everyone has seen the late night infomercials about how easy it is to buy real estate from the bank and make a quick buck. The reality is that it is not as easy as they make it sound. There is definitely buying opportunities available but you need to understand how this process works.
Learn everything you can so you are prepared. REO vs. Foreclosure REO (Real Estate Owned) is a home that the bank takes back from the owner that is not sold at auction. Typically, the bank will work with the home owner to help them cure the default so they can avoid the foreclosure because the bank does not like being in the real estate business. In other words, they do not want to have property on their books.
The REO properties is typically property that has a mortgage balance equal or greater then the value. If you plan on attending a bank auction, you will also need to be prepared to not only pay the balance of the mortgage, but typically the bank will add on any other fees or costs that they have incurred up to that point. This could include accrued interest, attorney fees and other costs that have been part of the foreclosure process.
The other problem with auctions is that the bank will want you to have cash in hand if you have a winning bid on a property. Banks will not typically give you time to line up financing and this can make it impossible for anyone other then a real estate investor to get in and purchase a home.
One more item that is a big concern: Be aware of what you buy. At an auction, you are not going to have the time needed to research any other liens that may be recorded against the property. It is common to find most property being offered at an auction, actually have more owed against the home then it is actually worth.
Few foreclosures actually end up as a successful sale. If the property does not sell, this is when it goes back to the bank and becomes a Bank Owned Property, REO (Real Estate Owned).
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