REO Properties Versus Foreclosure Properties

Real estate owned or REO properties are properties that go back to the bank or mortgage company after an unsuccessful attempt to sell them at foreclosure auctions.  Most properties on auctions never make it to a successful sale.  These properties become REO properties after they are repossessed by banks or mortgage companies. 

The foreclosure sale usually begins with a minimum bid.  The minimum bid for the foreclosure sale includes the loan balance, any accrued interest, additional attorney’s fees and other costs associated with the process of foreclosure.  When you bid at a foreclosed property, you need to have a cashier’s check equivalent to your full bid amount. If you are successful, you will receive the property in its present condition. That means that you may also receive the property with someone still living in it.  In addition, there may also be liens against the foreclosure property.

However, since the money owed from the bank is higher than the property’s worth, foreclosure properties are seldom sold. 
When a property on foreclosure is not sold, it is brought back to the lending company.  These properties may now be called REO properties.

Once the banks repossesses the property, the borrower’s mortgage loan is eliminated.  Sometimes, the bank may force the original owners to vacate the property.  Some repairs may also be done on the property in order to make it more attractive to potential buyers.  After the eviction and repairs, the bank will negotiate with the IRS to remove any tax liens. If the property is bought, the buyer is given the chance to investigate on the property.

If you are planning to invest on real estate properties, investing on real estate owned properties would be the best idea.  However, not all of these properties are sold at bargain prices. You may want to do some research first before deciding to make a purchase.  Usually, private investors offer the best deals for REO properties.