n REO is real estate owned by the bank Cool Base

Chris Archer Jersey , and many investors consider an REO property

to be money just waiting to happen. An REO is different from a foreclosure

property in that the bank has already tried to sell it at a foreclosure auction

and has had no luck getting bids. Because the property was not bid on, the bank

then became the owner of the property. Naturally, the bank does not want to keep

the REO any longer than possible, and this makes it a great opportunity for an

investor. Not every REO is a good deal, but when you look at an REO youll

commonly find that there is a lot of money to be made.

So, is this a

foreclosure?

Technically speaking, the home was foreclosed on because the

owner of the home failed to make their scheduled payments. The bank set up and

went through a public auction, but there was not any bids placed on the home, so

the bank ended up owing the property. Yes, the home was foreclosed on, but it is

well past the foreclosure process and the bank will be anxious to get rid of the

property.

Advantages of REO vs. Foreclosed Property

When you are

thinking of buying an REO you have to distinct advantages that a buyer does not

have with a foreclosed property. The first is that you are able to buy on your

schedule, as you do not have an auction date to work with and around. You can

make an offer of the home any time; you dont have to wait for bidding to begin.

Another big advantage of an REO compared to a foreclosed property is that you

can inspect it before you buy, when you cannot do this with the majority of

foreclosed homes that you think about purchasing. Being able to inspect the

property before you buy will let you know how big of a project you will be

dealing with.

Best types of REO to purchase

You might not think

the type of loan the home was purchased with the first time around matters but

it does. You should attempt to purchase REOs that had a conventional loan the

first time around, as you will likely get much better deals with these than you

will if you look at FHA and VA loans. The federal government backs FHA and VA

loans, and the government can actually buy them back if they are so inclined.

Homes that had conventional loans the first time are often purchased for just a

fraction of their value, meaning that they can make an investor a lot more

money.

Which REOs you should not purchase

Just because the bank

owns a property does not make it a good deal. In fact, when you see that a home

or property is an REO you have to wonder exactly what IS wrong with it. The

house was not bid on because no one saw the worth in it. Did the home just not

have enough equity? Were their IRS liens against it? Was the property just too

badly damaged? You need to ask these questions. If the bank cannot answer the

questions then you need to be even more skeptical. Take advantage of your right

to inspect the REO so that you can see with your own eyes what may or may not be

wrong, hire professionals if necessary as well.

One must also be sure

that if they are purchasing an REO to fix it up and sell it, that the property

is located in a desirable part of town. If the home is not located in a

desirable part of town, you should really think about how wise of an investment

the property may be. Perhaps location is why the property was not bid on at

auction. There are three big things to consider when dealing with any type of

real estate and those are location, location, location. Never let a seemingly

good deal let you lose sight of how important location is for any piece of real

estate that you intend to sell.

Why the bank will sell an REO

cheap

Basically, a bank is not set up to deal with real estate. Sure,

they give loans to people, but really, they are not equipped to buy and sell

real estate. Because banks are not accustomed to dealing with real estate, it

often takes them awhile to get the ball rolling so that they can repair the

property, and get an agent to sell the property. What this means is that while

the bank attempts to get their business together they are losing money hand over

fist and the federal government often penalizes them for each and every REO that

they acquire.

Because the bank is loosing so much money on each REO, they

are willing to sell it fast and cheap. In fact, banks commonly sell an REO

property for around 30 of its value just to be done with it. Sure, they end up

losing money on the deal, but they end up losing less if they sell cheap now

than they would if they kept the property for another six months while they try

to pull everything together so that they can sell the property.

The great

thing about working with the bank with an REO is that you arent buying site

unseen. Because you can walk through the house and make all the inspections that

you want, you can deal with them in a way that will give you the best deal, and

the bank will typically be happy with any serious offer because it will get the

house off of their hand and they will stop losing money.

Generally REOs

are a great investment as long as you know what you are getting into. The bank

simply wants to get rid of these homes, and if you find the right property and

are ready to make the serious investment, it can be a great way to get off and

running in the real estate business.

Author's Resource Box

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