An REO (or Real Estate Owned) is a type of property that is owned by a bank. After an unsuccessful foreclosure auction, the property will revert back to the bank, which now owns the property outright and the outstanding loan on the property no longer exists.
Bank owned houses can provide a great investment opportunity for interested buyers since banks are generally not in the business of owning properties. In fact, they often offer substantial discounts to make these properties look more attractive to buyers.
A bank owned home for sale can sometimes be obtained for really cheap. Every bank that deals with mortgage loans will have a department that specializes in REO properties, selling these properties below market value since they don't want to take the time to stage the property and make upgrades like a Realtor would with a normal sale. Therefore, it’s not uncommon to buy a house from a bank for 60% off.
However, it is essential to note that these bank owned properties are generally sold in an as-is condition, meaning what you see is what you get. So be sure to take that into account when you are making an offer.
Here it’s important to mention these bank owned properties are generally sold in an as-is condition, meaning what you see is what you get. So be sure to take that into account when you are making an offer.
Finding a house for sale that belongs to a bank is not hard. In fact, you can do just that browsing foreclosure listings. Similarly, you can also go the traditional route by contacting a Realtor. Most agents, though, deal with traditional sales, so you'll want to find someone that specializes in specific types of properties such as bank foreclosures if you choose to hire a Realtor.
If you know how to buy a house, you're already on the right track to buying a bank owned property listing. The process is very similar but you need to carefully research each part of the process.
Finding Properties
Bank owned foreclosures aren't that tough to find. There are Realtors who specialize in these types of investment properties or you can use the internet to aid you in your search. A lot of the major banks even have websites dedicated solely to bank owned property for sale in your area.
Get an Appraisal
The condition of REO's vary widely and so do the discounts. But if you intend to make a profit on this bank owned property listing, you'll need a solid appraisal.
Get an Inspection
This is one of the most important parts of the process since generally, the banks will try to force you into buying in as-is condition. That means that no matter what problems there are, you won't receive any savings off the listing price.
But don't let the banks fool you, you can often negotiate an as-is listing if you find some major or even minor damages during inspection. This is money well spent so don't go with a cheap inspection, find someone who is reliable and highly rated.
Be Patient During Closing
Closing on an REO isn't quite the same as closing on a traditional sale but if you've done the latter, you'll have a head start. With a traditional sale, you're dealing with a single private seller so you can expect a prompt response and negotiation. But with a REO, you're dealing with a bank which will often have multiple people working on your case.
Expect to receive a counter-offer or two but be smart in your negotiations. You may end up dealing with different agents, so be patient but persistent. If you're investing in an REO, it's in your best interest and the bank's to expedite the closing process so remember you're both on the same side.
While bank owned foreclosed homes might be the most popular REO's, don't think that they're the only option. You can find a wide variety of properties from commercial foreclosed homes to condos for sale.
But just remember that the same rules apply no matter what type of bank owned property you're dealing with. REO's are a great investment opportunity but make sure that you do your research and find an appropriate property for your situation.
