Reo Properties and Bank Foreclosures

By: David E. Williams

Whether you're in the market for your first new home or your tenth, you'll discover that there are a lot of new options available to prospective home buyers. You'll find traditional buying options, online home auctions, and other choices a Realtor can explain to you. One buying option you may not have thought of, though, is that of bank owned properties.

If a bank can not sell a property at a bank foreclosure auction, the bank may do an REO sale. This can happen when the amount owed on the property is more than the value of the property. When this is the case, the bank tries to sell the property not at an auction where the price can be lower. At this stage of the process, they will most often sell the property through a Realtor.

When buying real estate owned properties, take note of the condition of the property you are buying. Many real estate owned properties that are priced low may need substantial repairs. In most cases, these repairs can easily be completed without lowering your profit margin.

However, there will be some properties you should not consider because the associated repairs would be too costly. Be somewhat cautious but realize these properties that require some work often reap the greatest reward.

Current and potential investors can find bank owned homes from several sources. Banks often have search engines on their web sites that allow people to look for properties in different locations. Searchers can use price, amenities, and other factors to narrow down the selections so that they can find properties that look like good investments.

Other ways to find bank foreclosures include going to third party listings. There is a proliferation of independent and third party Web sites who will also provide information about properties. With all Web sites, however, be careful. Many of these sites are trustworthy, but not all are. Use your best judgment when dealing with third party listings.

Often when you make an offer on a bank owned property the bank will counter offer. Expect a period of price-haggling and negotiation to get to a final acceptable price. During the negotiation process, be sure to mention any repairs that are needed. Upon purchase you will receive a policy that covers title insurance. Do not fall into the trap of becoming so enamored of a particular property that you pay full price or above. Negotiate and talk things over and you will be good to go.

Every successful real estate investor has good sources of property deals as a key part of his arsenal. One option that you may consider is that of bank foreclosures and REO properties. If a bank fails to sell real estate at a foreclosures auction, they will commence an REO sale. Properties are often sold cheaply at this stage because they did not sell during the foreclosure process and once they are owned by the bank they are simply an expense that needs to be removed from their accounts.

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Foreclosures
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