What are REO Properties?

You may have heard the term floating around in news reports and articles and wondered, what is REO? REO or Real Estate Owned properties are properties owned by the lender – usually a result of foreclosure. When a foreclosed home goes to auction and is not bid upon, the property title is returned to the mortgage lender. It is now considered an REO property.

This situation can create a beneficial position for buyers interested in the home because financial lenders typically want to unload the property and free up that capital, giving buyers great leverage for negotiating a good deal. Even though buyers may have the upper hand in an REO home sale, it is very important to know what you’re getting into and to research the condition the property beforehand. The bank or lending company does not necessarily have the drive to ensure a home is in tip-top selling shape like an individual homeowner might – especially if they have multiple REOs.

To play it safe, buyers should talk with a real estate agent if thinking about purchasing an REO property. The process is a lot like buying a standard home for sale, but there are some potential pitfalls involved that you need to understand and discuss with your Realtor. Find out about all maintenance and repair problems, any tax issues, how long it has been vacant, and other possibly troublesome matters that are common in foreclosure properties.

You and your Realtor can use a comparable market analysis of other homes in the vicinity to determine the property’s worth, factoring in the cost of fixing any major defects and covering additional expenses associated with the home. The advantage is foreclosed homes sell for below market value so buyers can save on the purchase price. You make an offer to the lending institution and, perhaps after a few go-rounds of counter offers, come to an agreement on price and terms. The number of REOs has increased in recent years, giving buyers more opportunity to invest in a real estate owned property. So ask your agent if this is a viable option for you.

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