REO Properties
What are REO Homes?
Real Estate Owned (REO) properties are foreclosed houses that are now in possession of the bank. A borrower fails to make payments on their mortgage loan, the bank sent out a notice of default, a notice of trustees sale, and the house was placed at a public auction. Because the property had insufficient equity, it was not worthwhile for any real estate investors to purchase the house at the public auction. The bank sets the starting bid, usually at the amount owed. Since nobody bought it, they take title of the house and it becomes a Real Estate Owned property. Banks are in the business of lending, not in owning homes. They do not want to be landlords or Realtors, and therefore want to get rid of the property with the smallest possible loss. The carrying costs of owning thousands of houses without a borrower making a monthly mortgage payment add up. Banks want to get rid of these properties and so they sell them as REO Homes.
REO homes are usually sold below market value. The lenders want to get rid of them quickly and don't want to worry about getting them in tip top selling shape. Lenders usually sell their REO properties "as is" and without warranties, meaning they are not going to guarantee that the plumbing, heating, cooling, water heater, sprinklers, etc. are in good working order. Most, but not all REO properties have been beat up pretty badly. Owners of homes in default usually want to "stick it to the bank" and so do as little as possible to place the home in selling shape. Many times they'll even go out of their way to trash the house, putting holes in the walls, destroying things, and removing dishwashers, ranges, microwaves, and other real property that may have value.
Because lenders want to get rid of properties quickly, they nearly always list the property with a real estate broker. Each city usually has select agents that specialize in REO properties. These properties end up on the local Multiple Listing Services.
How do I find REO Homes?
Because REO properties are listed by real estate agents, they are listed on the Multiple Listings Service. Your best bet is too search listings online. On the Zip Realty MLS search foreclosures are usually found near the front of your search, as they are often but not always some of the least expensive properties for sale. The MLS listings are up to date, so you don't have to worry about finding REO's that have long since sold.
REO houses can also be found online using online services like Foreclosure.com and Realty Trac. This isn't the best source though as these sites rarely update their listings. Some bank owned homes may have sold a year earlier, but still end up listed on this site. These sites are good for finding preforeclosure properties, but are not a reliable source for real estate owned listings.
How do I buy REO Property?
Buying a Real Estate Owned property is essentially the same as purchasing any other home. You hire a buyers agent to help you locate a sutiable home, write an offer, get it accepted by the lender, and then close the property. The difference is that banks often play by their own rules and regulations. The people you will deal with know nothing about the property, and they are usually slower to respond to offers. A lot of the time they don't really know the true worth of the property or anything about it. Another difference is that banks usually sell their REO's as is, and without any warranties express or implied.
Areas you can find REO's for Sale:
While Real Estate Owned listings are found anywhere in the country where foreclosures happen, you can gain access to MLS listings right now for these Metro areas: