What is an REO?
REO is an acronym for Real Estate Owned and refers to properties owned by banks and mortgage companies. These are properties that have completed the foreclosure process. The bank that originally lent out the money on the mortgage took back ownership of the property through the foreclosure process and is now offering the property for sale.
Why are REO's such Great Potential Investments?
Banks and Lender's have no emotional ties to their properties. They are purely financial transactions to the bank. Banks are not real estate experts and generally are not good in managing their portfolio of foreclosed homes. Everyday that a home sits unsold on a banks books is a day that the bank is losing money through lost interest and fees. Also, properties that are owned by banks tend to depreciate much faster and are subject to vandalism because they are vacant. Last, federal lending laws limit the amount a bank can lend based on the number of bad loans and reo properties currently on their books. In a nutshell, the more REO's a bank owns, the less money a bank can lend. All of these factors add up to great deals on homes!
What are the Potential Drawbacks to Purchasing an REO?
Properties sold as REO's require more extensive documentation as the lenders look to protect themselves throughout the transaction. There will be no Seller Property Disclosure Statement and properties are always sold in "as-is"condition. Contracts will have more stringent terms but are manageable. Often times adequate inspections will take more time and be more costly as the property has usually been fully winterized with all of the utilities cut off.
How Do I find REO's in the MLS?
It is very easy to find these properties in the MLS search. The two most common phrases used in listings of foreclosure properties are "Property Sold As-Is" and "No Seller Disclosure". These two phrases or some variation thereof is a tale tell sign that the property is a foreclosure property. When searching for these type of properties use the Advanced Search and use the box "Key Words to Find". Be sure to use the key words contained in those phrases and not the phrases themselves. You should also separate such words with a comma to get a full listing of such homes. An example of keywords to use in this example are: No, seller, disclosure, property, sold, as-is, etc. Agents can phrase their wording in many ways, therefore, it is better for you to search the particular words rather then particular phrases.
