Why_Buy_An_REO_ by georgetitan

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									Title:
Why Buy An REO?


Word Count:
1018


Summary:
An REO is real estate owned by the bank, and many investors consider an REO property to be money just
waiting to happen.



Keywords:
foreclosures, real estate foreclosures, reo, liens, foreclosures investing, california foreclosures



Article Body:
An REO is real estate owned by the bank, and many investors consider an REO property to be money just
waiting to happen. An REO is different from a foreclosure property in that the bank has already tried to sell
it at a foreclosure auction and has had no luck getting bids. Because the property was not bid on, the bank
then became the owner of the property. Naturally, the bank does not want to keep the REO any longer than
possible, and this makes it a great opportunity for an investor. Not every REO is a good deal, but when you
look at an REO you’ll commonly find that there is a lot of money to be made.


So, is this a foreclosure?


Technically speaking, the home was foreclosed on because the owner of the home failed to make their
scheduled payments. The bank set up and went through a public auction, but there was not any bids placed
on the home, so the bank ended up owing the property. Yes, the home was foreclosed on, but it is well past
the foreclosure process and the bank will be anxious to get rid of the property.


Advantages of REO vs. Foreclosed Property


When you are thinking of buying an REO you have to distinct advantages that a buyer does not have with a
foreclosed property. The first is that you are able to buy on your schedule, as you do not have an auction
date to work with and around. You can make an offer of the home any time; you don’t have to wait for
bidding to begin. Another big advantage of an REO compared to a foreclosed property is that you can
inspect it before you buy, when you cannot do this with the majority of foreclosed homes that you think
about purchasing. Being able to inspect the property before you buy will let you know how big of a project
you will be dealing with.


Best types of REO to purchase
You might not think the type of loan the home was purchased with the first time around matters but it does.
You should attempt to purchase REO’s that had a conventional loan the first time around, as you will likely
get much better deals with these than you will if you look at FHA and VA loans. The federal government
backs FHA and VA loans, and the government can actually buy them back if they are so inclined. Homes
that had conventional loans the first time are often purchased for just a fraction of their value, meaning that
they can make an investor a lot more money.


Which REO’s you should not purchase


Just because the bank owns a property does not make it a good deal. In fact, when you see that a home or
property is an REO you have to wonder exactly what IS wrong with it. The house was not bid on because no
one saw the worth in it. Did the home just not have enough equity? Were their IRS liens against it? Was the
property just too badly damaged? You need to ask these questions. If the bank cannot answer the questions
then you need to be even more skeptical. Take advantage of your right to inspect the REO so that you can
see with your own eyes what may or may not be wrong, hire professionals if necessary as well.


One must also be sure that if they are purchasing an REO to fix it up and sell it, that the property is located
in a desirable part of town. If the home is not located in a desirable part of town, you should really think
about how wise of an investment the property may be. Perhaps location is why the property was not bid on
at auction. There are three big things to consider when dealing with any type of real estate and those are
location, location, location. Never let a seemingly good deal let you lose sight of how important location is
for any piece of real estate that you intend to sell.


Why the bank will sell an REO cheap


Basically, a bank is not set up to deal with real estate. Sure, they give loans to people, but really, they are not
equipped to buy and sell real estate. Because banks are not accustomed to dealing with real estate, it often
takes them awhile to get the ball rolling so that they can repair the property, and get an agent to sell the
property. What this means is that while the bank attempts to get their business together they are losing
money hand over fist and the federal government often penalizes them for each and every REO that they
acquire.


Because the bank is loosing so much money on each REO, they are willing to sell it fast and cheap. In fact,
banks commonly sell an REO property for around 30% of its value just to be done with it. Sure, they end up
losing money on the deal, but they end up losing less if they sell cheap now than they would if they kept the
property for another six months while they try to pull everything together so that they can sell the property.


The great thing about working with the bank with an REO is that you aren’t buying site unseen. Because
you can walk through the house and make all the inspections that you want, you can deal with them in a way
that will give you the best deal, and the bank will typically be happy with any serious offer because it will
get the house off of their hand and they will stop losing money.


Generally REOs are a great investment as long as you know what you are getting into. The bank simply
wants to get rid of these homes, and if you find the right property and are ready to make the serious
investment, it can be a great way to get off and running in the real estate business.




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