With so many foreclosures and distressed properties on today’s market, many would-be homebuyers are wondering if buying an REO is a good idea. REO stands for “real estate owned” and simply refers to foreclosed property that has been repossessed by a lender or bank.
Should You Buy an REO?
Sometimes the lender will be the highest bidder at a foreclosure auction, or sometimes no one will bid at an auction. In these instances, the property goes back to the lender and is then known as an REO. This means that the REO is a property that has not only gone through the process of foreclosure, but has also gone through an auction – all without a buyer. You can almost smell the savings in the air…
That brings us to our first point in the argument for buying REOs. The best thing about an REO is that banks will bend over backwards to sell them and get them off their books, since these homes are a liability for them. For this reason, REOs are usually sold at prices that are well below market value, and sometimes these properties are available with little money down and super low interest rates.
Realtor’s Are Best When Dealing With Complicated Deals
Your Realtor is obviously your best source to help you locate REO properties for sale. You can also do a search online, or go to the banks themselves. Every bank and every lender has a different route for handling distressed properties.
Some may post foreclosures on their websites. Others may have a particular person whose sole job is to move this “shadow inventory” as soon as possible. Some lenders may have a loss mitigation department that handles REOs. Others may list REOs with a Realtor.
- There are a number of advantages to buying an REO property, including:
- You can get a real “steal” of a deal on an REO property, in most cases, at least.
- There is less competition and less risk when buying an REO.
- There are no encumbrances on the title when buying from the bank. All liens, taxes, and so on, have been cleared up.
- You can often negotiate with the bank (since it owns the property) to reduce or eliminate closing costs. This can save you thousands right away.
- The property is usually already vacant and the bank has already evicted the owner. This can save the potential homebuyer or investor money and time – and you don’t end up playing the part of the “bad guy”.
Now that you have heard the bells and whistles of REOs, it is a good time to mention one of the major drawbacks that can sometimes be associated with this type of home purchase. Most REOs are sold as-is, and this means that you might end up buying into a lot of problems that you were not aware of. Some previous owners strip everything from the copper wiring in the walls down to the kitchen sink before moving out of the home. It is always good advice when buying an REO to make your offer for the property subject to having the home inspected.
About the Author – Paula Henry is an Zionsville Real Estate agent. Visit her website to search hundreds of Homes for Sale in Zionsville Indiana and find more information about buying or selling a home at her Indianapolis real estate blog.
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