REO Properties stand for properties which are Real Estate Owned – meaning properties which are actually foreclosed properties, being put up for sale by the financial organization – or the bank.
REO Properties – Why are they a great bet?
When a home is purchased under a finance scheme, and when the home owner defaults on the payments, the bank moves in to foreclose the home. As a part of the foreclosure process, the home owner aspires to sell the home and clear the loan of the bank. However, it happens sometimes that the homes don’t get sold – even in an auction, and the bank takes over the property, becoming the owner. One thing you should note now is that a property remaining as not sold means that the bank’s opening bid hasn’t been met.
When a property is taken over that way, it actually becomes a liability on the bank balance sheet – though it is shown under assets. No bank wants its money to get stuck in the form of a property. The more liquid cash they have, the more they can earn off it. Hence, when they have a foreclosed home, the bank wants to move it as quickly as they can, and flip it for cash. Like mentioned above, the opening bid of the bank hasn’t been met during the auction, and the bank will want to move it out at a price even lower than its expected bid.
REO Properties – Do they work?
Absolutely! There are hundreds of properties which get sold through banks every single day, and the prices of some of them are absolute steals. Homes which would have fetched millions of dollars when the markets were going strong are now being sold at a huge discount on their market price – since the banks just want to get the property off their books.
The same model also applies for Non-Banking lenders who foreclose on homes. If you follow the newspapers, you will know that there are tens of thousands of homes which are running through foreclosure right now, and a significant percentage of them will end up as REO Properties.
Where to find REO Properties?
That is the million dollar question really. Though not many people know about this market, there are quite a few serious players who have made dealing in REO Properties as their profession. With their contacts, they just pick up properties as soon as they are put on sale, and flip them for a profit later. If you are looking for a home to buy for your family, or you are looking to get into the real estate market selling homes, this could be a great opportunity for you too.
But the question is how to find these properties. Usually these properties are mentioned in newspapers, but then there are too many of them to follow! And you don’t want to sit around with a bunch of papers each day trying to figure out which property is available in your region. Instead, head over to a website that deals with REO properties and you can make your filters in a few clicks. Some of these websites also provide assistance so you can evince interest in a home you like.
If you are looking to turn it into a business, you should know the investment you need to put into the home before selling it at a profit. REO Properties – since they’ve been empty for a while – tend to be poorly maintained. So you will have to do up the exteriors, and make any emergency repairs before putting it back on the market. Or you can look for homes which have been maintained by third party Property Preservation companies – which ensure that the basic upkeep of the home is done, and they also keep away squatters. There might be an additional charge on the invoice, but it is well worth it, and that investment will easily be made back when you flip the home later. There is also an option called Bulk REO Property – in the case of a wholesale set of properties which have gone under. You can look at those once you get used to the market.
In all, REO Properties are an amazing way to save money on your dream home, and they could also be an alternative career option for you! Worth checking out.
