REO properties are increasingly infiltrating into the homebuyer’s market as lucrative deals. REO property is an acronym for Real Estate owned property and is a kind of foreclosure asset in the market, i.e. a property which is owned by the bank or more precisely, the lender. The reason why the lender gains a possession of the property is the fact that the property has slipped under default, is distressed, is foreclosed on, and has not been able to attract bidders in the foreclosure/courthouse auction. This transfers its ownership to the lender (the bank), who then holds the right to sell it off to liquidate it.

Considering that a REO is almost always distressed, a lender usually repairs it to satisfactory standards before putting it up for sale. If not, it will almost certainly offer a discount to the purchaser for repairing it.

REO properties – buying them

Buying a REO properties are surely advantageous since the houses are sold at a fraction of their real market value and if you manage to get it at a well-discounted price, you can easily sell it off/rent it out later at a much higher value in the property market.

Another advantage of procuring an REO estate from a lender is the fact that the lender, in most cases, is the superior lien holder, thereby pushing aside all prospective liens you can face in an auction. This precisely means that an REO will always bear a patent title, which is obviously a big deal when putting your stakes on a foreclosure properly. In all probability, property taxes in debts are also already cleared off here.

On an average, you can expect to get 5%-15% off the current market value when buying a REO. An informed buyer of REO can procure upto 25% discount on the market price of the property.  Remember that the bank is as eager to sell off the property as you are to buy it. So do not rush and agree with the price that the bank quotes at the first meeting, however lucrative it may look. Negotiate on the price to gain more!

REO properties – negotiation grounds

If you have managed to locate a REO property that you want to buy in your area, the next very important step to consider is the price. In all probabilities, the price would look like a deal to you. But negotiating with the bank can gain you a much higher discount than what you are already getting. Four main grounds of negotiations are-

• Price of the REO
• Down payment amount
• Interest rates charged
• Closing cost

Banks will entertain adjustments in REO properties price, as long as your expectations are realistic and sensible.

REO properties list

Banks follow a strict pattern in preserving their REO data and keep them with respective bank officials of all branches. These officers offer the list for a review by clients, who they feel, can be good potential candidates for buying them. REO properties lists are also put up on bank websites of specific banks.