What does REO mean when buying real estate for sale?
As a real estate investor, I am often asked what REO means when buying real estate for sale. Short for ‘real estate ownership,’ REO refers to foreclosure property repossessed by mortgage lenders. When foreclosed real estate is not sold through public auction, it is returned to the lender, who in turn lists the property for sale through an assigned real estate agent.
A second question buyers ask is what does REO mean in terms of buying houses at reduced prices? Most bank-owned homes sell for slightly below market value. Since properties are sold “as is,” banks consider home repair costs and adjust prices accordingly.
Although REO homes are often more expensive than homes sold through public auctions, they are generally actually cheaper. Most foreclosed properties require multiple repairs because foreclosed homeowners are financially unable to adequately maintain the home.
Many properties sold through auctions have links and judgments attached. In some cases, owners of foreclosed homes continue to reside in the home until they are evicted by the court system. All these issues are resolved once the bank takes possession of the home. Buyers can buy REO homes with clean title and take possession quickly.
Real estate properties are sold through the loss mitigation division of each bank or designated real estate agent. Since banks have incurred foreclosure legal costs and fees associated with liens, judgments, or tenant removal, there is little room to negotiate the asking price.
Bank-owned homes can be a great option for first-time homebuyers, real estate investors, or people looking for an affordable vacation home. REO homes are perfect for use as rental homes or lease-to-own properties. Since bank-owned foreclosures are priced below market value, investors can make a profit by rehabbing and remodeling the home or offering pass-through financing to the seller.
Buying REO properties from the bank can save investors and homebuyers time and money. There is no need to spend time trying to remove tax and creditor liens or start an eviction action when tenants refuse to vacate foreclosed properties.
The bank takes care of the time-consuming details; allowing buyers to purchase the property at a reduced price and quickly take possession of the property. Closing on a foreclosure can take several months, while REO purchases can speed up in a matter of weeks.
There are many resources available for locating real estate. Across the country, Remax, Prudential and Bank of America post bank-owned foreclosed homes for sale directly on their company websites.
Many mortgage lender and real estate agent websites include additional resources to help borrowers further reduce the cost of buying homes through first-time homebuyer programs and government grants.
These are just some of the options available to buy REO homes at reduced prices. The Internet offers a wealth of information to help home buyers and investors locate distressed properties. Local real estate agents often offer foreclosure seminars to help buyers understand the process of buying foreclosed homes through auctions or bank loss mitigators.
Take the time to conduct research, attend seminars, or speak with real estate professionals to learn the ins and outs of buying REO real estate. Doing so can help you get exceptional real estate at significantly reduced prices.