Buying Bank Owned Properties
Bank owned properties, or REO (Real Estate Owned) properties are properties that have completed the foreclosure process without successfully selling. Generally foreclosures, like HUD houses, are put up for bid once in the foreclosure process so that lenders can recoup as much of the outstanding mortgage as possible. If no one successfully purchases the home during the foreclosure process, the home becomes owned by the bank with the mortgage debt erased as that point.
Purchasing bank owned real estate or REO’s is a great way to get a discounted price on a property. Banks usually aggressively price the homes or properties in the MLS at a deep discounted price compared to the market price for a similar type of home. Once buyers place purchase offers with the real estate agent, all offers are presented to the bank and the bank selects what they believe is the best offer with the lowest risk level.
So how can you find out or start putting in offers on REO properties? Below are a few suggestions to get ahead of the competition.
- Ask your real estate agent to create a search in their MLS for REO property, and to have the system automatically email you or call you when one is listed.
- When you are notified that an REO property has been listed, review the specification quickly, ask your real estate agent to show you the home the same day, and if you are interested, put in a purchase offer immediately. Banks put priority on the order the offers come in on the homes. So being amoung the top one or two offers puts you in a significant advantage.
- Put in an offer slightly higher than what the banks asking price is. Again, banks list REO properties at deep discounts, so even bidding higher than the asking price will get you a great deal. Also, if previous offers come in at the asking price, your offer will most likely be chosen.
- Build a professional relationship with your real estate agent. Ask him or her to ask around about potential REO properties. You may get lucky and actually get notified of properties before they are even listed on the MLS. If this is the case, you may have no competition, and can work directly with the bank to close the deal.
REO properties are a great way to find homes at lower than market prices. Whether you are purchasing a primary residence or investment property, there are not many better deals out there compared to purchasing foreclosure and REO properties.
Other articles on Investment Property can be seen in our Investment Property section.
See our popular article on HUD foreclosures.
Tags: REO Mortgage