REO Investing
REO can be defined as a particular type of asset, but in real estate the term REO indicates that the property in question has gone through foreclosure process, unsuccessful to find a buyer at the auction and is now owned by the bank.
Normally a bank will set the opening bid at a foreclosure auction for at least the remaining loan amount. If there are no interested bidders then the bank legally reclaims ownership of the property. As soon as the bank regains possession of the property it is then listed on their book as REO (Real Estate Owned) and is categorized as a non-performing asset.
After the property repossession and being classified as REO, the bank will get rid of some of the liens as well as delinquent taxes, HOA and mechanics’ liens and try to resell it either through future auction or direct marketing through real estate broker.
Usually bank REO properties need repairs and maintenance; however, Investors aim for these properties since they can buy it at a lesser price than the actual market value. Banks are not in into business of owning homes and they rather agree to sell the house at a cheaper value. The price actually compensates the condition of the property.
Compared to other foreclosure properties, REO’s are not difficult to find. All you have to do is to contact a mortgage company or bank. They will give you a list of REO’s in your area. A lot of banks have their own REO Departments and agents that will help you search available properties.
Another advantage of acquiring an REO property is that they are commonly vacant. Investors are able to save a remarkable amount of time and energy because the eviction process has been taken care of by the bank.
Investing in REO has been the primary area for real property investors due to its potential return of profit and it’s less risky since the house is free of title liens and other claims. You may not be interested in buying a foreclosure property for yourself but you have the option to create a profit by reselling it.
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