Three Ways to Find a Preforeclosure That Has Become An Reo

By: Ada Smith

When a homeowner misses several mortgage payments and the bank begins to foreclose, the house is known as a preforeclosure. A preforeclosure is a house that is in foreclosure that you can buy up until the day of the foreclosure auction. If there are no bidders at the foreclosure auction, the bank that initiated the preforeclosure process will end up owning the property. The former preforeclosure then becomes known as an REO - Real Estate Owned by the bank. Banks do not want the preforeclosures that end up as REOs and will often give you deep discounts just to get rid of them. Go after REOs that had conventional loans on them when they were preforeclosures.

A conventional loan is a loan that is not backed by a government agency. Examples of government backed loans would be FHA and VA loans. Government backed loans that go to foreclosure get passed on to HUD (Department of Housing and Development). In general, you will have a tougher time getting a deep discount through HUD than you would with a bank. Stick with preforeclosures that had conventional loans on them before ending up as an REO because you will get a better deal.

To find REOs you can follow the preforeclosure notices in your local paper or through online preforeclosure listing sites. Once you have located the preforeclosures call the foreclosing attorney after the scheduled date of the foreclosure auction. Ask whether the preforeclosure was sold to a bidder at the foreclosure auction. If it was not, ask the foreclosure attorney if the former preforeclosure had a conventional loan on it. If the preforeclosure was originally purchased using a conventional loan, ask the foreclosure attorney for the name of the contact person at the bank so you can make a low offer on the REO. Make sure you get the banker's direct phone number because you only want to contact the person who makes the decision to sell the REO, just as you would only speak with the owner of a preforeclosure house.

Another way to find REOs is to call banks, mortgage companies, and so on and ask who handles their REOs. Make sure to ask them if they have any preforeclosures houses while you have them on the phone. The bank may be in the process of foreclosing on a property and will give you the foreclosure attorney's number so you get information about the preforeclosure. Once you have a list of banks to contact you can call every few weeks to find out if they have any new REOs in their inventory and at the same time see if the have any preforeclosures scheduled. The third way to find an REO that began as a preforeclosure is to ask a real estate agent to search local listings for houses are listed as foreclosures. To be a successful preforeclosure bargain hunter, you should not overlook the tremendous opportunities you can get with REOs. Of course, you should first try to get the house in the preforeclosure stage. If you cannot, you still have a chance to get the house at a huge discount at the foreclosure auction. If you cannot get the house at either the preforeclosure stage or at the actual foreclosure auction, then you can go after it once it becomes an REO. Following a preforeclosure as it goes through the foreclosure auction process and then becomes an REO will expose you to many good deals you otherwise would not have gotten.

Foreclosures
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