Monday, March 2, 2009

Pros and Cons of Purchasing a REO Foreclosure Property

An REO is when the property has gone to foreclosure sale and no one purchased the property so the bank buys it back and it becomes bank owned. The bank then lists the property with a Realtor, and puts it on the market to sell. Sometimes the Bank make minor repairs such as putting in new appliances, changing the carpet and painting to make the property presentable.

Purchasing an REO can be beneficial if you find the right property and have good luck with the lender you are working with. My experience has been that not all REO’s are good investments because right now many banks are holding out to get market value for the properties. So if you do make an offer and it is rejected, keep watching for a couple weeks as the bank continues to reduce the price, and you may get the property at the price you hoped for.

REO Properties Nationwide can be found at Foreclosure Home Investors for FREE. Foreclosure Home Investors has REO listings posted by REO agents.


PROS

1. Reo properties are generally discounted.

2. You can inspect the property as opposed to buying a property at a foreclosure auction.

3. Title insurance is available because the lender has cleaned up all the title issues.

4. Sometimes the bank has remodeled the property already.

5. The banks usually respond within two to three days to your offer, unlike a short sale which can take thirty days to six months to get a response.

CONS

1. The property is sold as is. Most properties today whether they are foreclosure or not are sold as is anyway so this is not really an issue. If you do your due diligence during your contingency period then you know what you are getting involved with. If there are major repairs, the roof needs repair, the air conditioning is not working, that type of thing.

2. The banks are not as negotiable as you think. My experience lately has been that they are looking to get market price so if you come in too low, they won’t even counter your offer.

3. Multiple offer situations are occurring on some discounted REO properties if they are priced way below market. However many buyers are coming in extremely low on offers so don’t be discouraged if the Realtor says there is a multiple offer situation.

4. You have to submit your offer through a Realtor, unlike a short sale where you can deal directly with the owner.

5. Generally you need to close the deal quickly.

Again, REO properties are good values to invest in. It really depends on which bank you are dealing with and how much they want to get the properties off their books. I would encourage you to make offers on REO properties until you find one at a price you are comfortable with.

6 comments:

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Real estate in Pakistan said...

Hi

Great information in this post and i think the bank then lists the property with a Realtor, and puts it on the market to sell. Sometimes the Bank make minor repairs such as putting in new appliances, changing the carpet and painting to make the property presentable.

 
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