REO means real estate owned by the bank; these properties are a great deal for investors, who are looking for cheap or low budget properties. Foreclosure and REO are two different terms – in foreclosure properties bank tried to sell the properties in an auction but didn’t find the prospective buyer. So, when foreclosure property is not purchased by new buyer then bank becomes the owner of the foreclosure property. Naturally, now bank is not interested in keeping the REO properties with them, this will make a great deal for investors. REO properties are really good way to make money for investors; bank does not earn any profit. If you are looking for properties to invest then it’s always better to invest and look for REO homes. REO is good deal, because you can get property at the lower rate than the market value. It helps you to cut hassles of searching down sales and dealing with lenders.
Why investors invest in REO’s?
REO homes when compared to other forms of real estate investments, serves as a better option for investors to invest as they can own a cheap property, later it would generate a lot of money. Today, the number of REO’s has increased vividly in numbers which allows prospective investors to hand pick properties that meet their specific needs and investment purposes. These properties have become a lucrative business deal for real estate investors.
Advantages of Buying Foreclosure Homes-
Risk is minimum- REO properties belong to the bank’s inventory, which is a non-performing asset. The bank wants to get rid of encumbrances of foreclosure homes, when some properties are unable to find any buyer at auction. Bank can’t keep these properties with them for longer period; they sell it off at very low prices than current market price. Bank is open to negotiate- as when compared to foreclosure properties banks are not interested in negotiating the terms, they arrange an auction and sell the property to highest paid bidder. Whereas in REO properties banks are open to negotiate the terms and conditions attached to the deal with the investors. For REO properties bank offers better financing options than they would offer on foreclosure properties. Flexibility is more- when buying REO homes it becomes an easy task as banks act as a lending institution it becomes flexible to settle the terms and conditions of the loan more efficiently and in a faster time frame. Below market value- it’s a key benefit investment for buyers looking for homes, as they can own a good deal at lower rate than current market value. The REO homes are hot cakes because, taxes attached to the property are being paid by the bank and they want to get rid this non-performing asset as soon as possible. Great returns- when you buy properties owned by the bank at low price, you can re-sell the property at higher rate than bank. You can generate more money and fetch higher returns on REO homes. Availability- as when compared to foreclosure properties, REO properties are easy to locate and chances of availability is more. You just have to search on different banks sites- they have separate REO list of properties in your area or nearby area. If you require any help REO department and agents will guide you and solve your property matters.
Why does the bank sell an REO at low price?
Basically, a bank is a lending institution and is not set up to buy or sell properties. They provide loans to the people, but they are not equipped to buy and sell properties. The bank is not familiarized to deal with buying and selling properties. As this is not their regular course of action it takes time for them to proceed. When an owner of the property is not able to pay the installments, bank forecloses the property. But, it becomes difficult for the bank to meet repair expenses or any other miscellaneous cost. First, the bank loses out the money over a bad-debt and then federal government penalizes them on each and every REO homes. As the bank is loosing so much money on REO, they decide to sell it quick and at low value.
REO homes are profitable investments, as buyer owns a low priced property which can be sold at much higher price in the future. Before buying REO homes remember to research well about the property.