Bank REO

Chances are pretty good that you have heard about bank REO properties if you have been up late. There are infomercials all over the place advertising how easy buying bank REO properties is and how much money you can make off of them. While there is money to be made and deals are possible, it is very important that you know the facts about bank REO properties before you get involved in them.

First, you need to understand the difference between a foreclosure and a bank REO property. REO or real estate owned, is a piece of property that has reverted back to the mortgage company as a result of an unsuccessful foreclosure auction. Why is this important information to know? It impacts the price you are going to get the property for. Here is how.

First, you have to know that the house is not worth the amount of the mortgage owed on it. If it was, it there was any equity in the home, the owner could’ve sold the home to pay off the bank. Seeing as how that is not the case the home is foreclosed on and is sent to auction, where the bank hopes to unload the property.

Can you bid on a house at the foreclosure auction? Yes, and this may be where the better deal is. There are a few things you need to bid. For starters you need a cashier’s check in your hand for the total amount of bid you are making. If you win the property, then you get the property in an “as is” condition… this can sometimes mean that the owners are still living in the property. This can also mean that there are liens against the property that you will now be responsible for.

Being that 8 times out of 10 the property is not worth what is owed to the bank, there are very few successful foreclosure auctions, there are plenty of bank REO properties then. Now, the key that many investors try to use to their advantage is that it is bad for a bank to have properties on their dockets. The more REOs a bank has the less money they have to lend out, so they want to sell the properties, but often they are in it to make money over just unloading property that is impacting their ability to do business.

Let us talk about the sale of an REO property now. Once the foreclosure auction is unsuccessful and the property reverts back to the bank the mortgage on the home no longer exists. The bank takes care of evicting the people in the house and they might do some repairs on the home. They will take care of the IRS if there are tax liens and they will also take care of any homeowners association dues. If you are looking to buy an REO you will get a title insurance policy and you will have the chance to go in and investigate what you are getting ready to buy.

Now every lender works a little differently when it comes to selling bank REO properties though the goal is the same, they want the best possible price for the property. They aren’t going to dump a property to get it off the books. The going back and forth with the offer and the counter offers begins. Know that their counter is going to be higher than you think it because they have to save face with investors, auditors and shareholders. So have a counter offer for their counter offer.

Tags: bank REO definition, bank REO departments, bank REO foreclosures, bank REO properties