REO Properties – How To Grab Bank Owned REO Properties At Sensational Discounts

Whether you are new to the real estate market or a seasoned investor, you may be surprised to learn that REO Properties have become the current gem of smart homebuyers. As you know banks large and small are reeling from this economic downturn.

Numerous banks have racked up so many foreclosures that they have temporarily suspended foreclosures to help them clear the books of their current list of REO Properties. If you are not familiar with REO properties, now is the time to get acquainted

What Are REO Properties?
REO is the acronym for Real Estate Owned and it is a classification of properties that are taken over by a bank or lender after an unsuccessful sale at a foreclosure auction. When a homeowner falls behind on their payments, at some point the house heads into foreclosure. During that time, the homeowner can sell the property.

If it’s available them, they can work out a loan modification, if the bank agrees they can work out a short sale or give the deed in lieu of foreclosure, But barring any of those options, they will end up being foreclosed on and the property will be auctioned off to the highest bidder.

In today’s market, a foreclosure auction can take place and no one bids on a property! When that happens the bank legally repossess the property. Once that happens, the property is now classified as a REO or a Bank REO property. It is important to note that once a bank repossesses a property it receives another dubious classification as a non-performing asset. In reality, in this market, it is a depreciating asset because the bank is now forced to pay any fees, maintenance, monitoring costs, insurance and taxes.

Most people don’t realize the numerous costs associated with maintaining a portfolio of foreclosed properties. Let’s say a small bank has one hundred and twenty REO Properties on their books and between all of the fees, maintenance, taxes and insurance, it’s costing them roughly $375.00 per month per property. Multiply that times one hundred and twenty and the bank is dolling out roughly $45k a month or over a half a million a year!

This is where you come in to save the day and in the process find sensational REO deals. After taking possession of a property, the bank will typically go through the process of attempting to sell the property on its own. Generally speaking, REO properties that banks acquire as a result of the non-sale are usually in poor shape and require repairs and maintenance to make the presentable properties for the open market.

These are the properties smart money goes after! Banks are not in the home ownership business; neither are they in the home maintenance or repair business. That means the quicker they can move REO properties out of the non-performing asset classification and into the SOLD category, the better off they will be as a bank.

The most expedient way to gain access to these properties is to set it up so that you can close the deal immediately upon the bank accepting your offer. REO Bank managers love cash deals! They also love homebuyers and investors who know what they heck they are doing. If you’re going to purchase a REO or deal in REO properties, you need to have a professional inspector on standby and ready to go at a moments notice.

REMEMBER, lenders offer these properties without any warranty of any type, But with a thorough home inspector, you can gauge what the property needs and adjust your offer accordingly. By buying at this level, you will save time and money and help them clear out non-performing assets. In return you are able to grab properties at a substantial discount.

Author, Joel Marks of REODr.com