What To Look For When Buying REO Property

So you’re ready to take a leap and start buying REO property that’s out there while the market is so hot. After all, that guy on the infomercial said you could go out there and pick up foreclosure property for a song and sell it for a million bucks – over night! You’ll be rich! Well you better do a little research because there’s a big difference between buying REO properties and buying foreclosure properties and either way you go it’s going to take a little more than a “song” for you to take possession of that property.

A foreclosure sale takes place before the bank actually becomes the owner of the property and the minimum opening bid usually includes the loan balance, any accrued interest, attorney fees and any fees associated with the foreclosure process. You need to understand that the loan balance is generally a pretty significant amount of money and if there was enough equity in the property to satisfy the loan, or at least most of the loan, the homeowner in all probability would have sold it himself and paid it off. And that’s why most foreclosure sales do not even get any bids.

Those foreclosure properties that aren’t sold then become REO – Real Estate Owned by the bank and the mortgage no longer exists. The bank will then handle evictions if necessary and may do any necessary repairs. They’ll work with the IRS to negotiate partial or full removal of tax liens and they’ll pay off any association dues that are owed. And contrary to popular opinion, now that the bank actually owns this property it’s in no hurry to sell it. The bank needs to make back it’s investment so the popular myth that you can pick these REO homes up for a song is just that – a myth. Banks now have separate departments for their REO properties and they enjoy the same tax benefits that other property owners do. These houses might be somewhat lower in price but they are not free and growing on trees.

Before you start bidding on foreclosure properties and buying REO properties it’s best to do some research on each individual property. You will want to know about tax liens and mortgage balances and property values and market value. You will also need to tour the properties and get an idea of repair costs.

When you go to a foreclosure sale you’re going to need a cashier’s check for the full amount of the sale so it’s best to have your financing already lined up before you even start. It’s also best to know precisely how high you are willing to bid and be ready to stop. Too many buyers think they need to buy every piece of foreclosure property that goes up on the block just because since it’s a foreclosure it must be a great deal. As mentioned above – it’s not. Therefore be prepared to step away once you hit your limit.

Before buying REO properties it’s always best to consult with a Real Estate agent who can advise you on things like market value versus the bank’s asking price and how best to obtain financing that the bank will approve of.

Learn more about Buying foreclosures. Stop by Theodore S. Lincoln’s site where you can find out all about What makes a good investment property and what it can do for you.