Home buyers looking for a bargain are taking a close look at the housing market and are witnessing some unique opportunities. For one, prices have fallen — dramatically so in some areas — opening up home buying to people with very good credit and the cash to put down on a home.Even in local markets where home values have remained steady there are additional options for consumers looking for a bargain including REO — real estate owned property. Let’s take a look at REOs to learn what they are and what is involved with buying one.
REOs – Real Estate Own Properties
REOs are real estate owned properties which are owned by the lender — mortgage company or bank — that weren’t sold at foreclosure. The previous owner is no longer on the premises as foreclosure action transferred the home to the lender.
In most cases REOs present a serious drain on the lender who is now holding onto a piece of property that is typically worth less than what is owed to the bank especially when attorney fees, loan balances and maintenance costs are factored in.
When To Consider An REO
If an REO property fails to sell at foreclosure, the lender will try to sell the property again, sometimes through a realtor or by means of an auction. In this case, an REO is worth considering especially if the following criteria have been met:
- Most of the liens or expenses related to the home are not included with the sale. This means that if property taxes haven’t been paid for some time or loan related expenses haven’t been recouped, the bank will not pass these expenses on to you. Instead, the lender will absorb most of the costs and sell the home to you as is.
- The home is salvageable despite needing extensive repairs. One big reason why a foreclosed home might not have sold is that the house is in poor shape. Perhaps new roofing, drywalling, flooring or some important structural work needs to be done to the house before it can be inhabited. Buyers must factor in the costs of these types of repairs when bidding on an REO.
REOs, An Opportunity For Some
In housing markets which have seen many foreclosures and a dip in home values, REOs are plentiful and great buys can be had. Banks are not in the business of holding and maintaining property, therefore if you do your homework and offer a fair price, an REO can be one way to profit from the current down turn in the real estate industry.
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