Recently, the nation has been seeing a staggering number of homeowners who are entering into the foreclosure process. News about the ’sub-prime mortgage meltdown’ are popping up left and right, and in the meantime, banks are rushing to get rid of their escalating supply of REO properties. Investors and those who are experts in purchasing foreclosed homes are vigorously looking for their next investment since banks are selling their REO at prices below their market value. Generally, REOs and foreclosures are not selling at prices too far below the market value; nonetheless, speculators are eagerly expecting to see a steady supply of REO properties, if not a surge, listed on the market for sale. This is all good news for those who are avid bargain hunters looking for a great real estate investment.
REO properties will be will be cheaper for homebuyers. This is because banks want to sell the them quickly. It is in their interest to liquidate their real estate properties and invest their money in order to make more. Holding onto and managing REOs are headaches for lenders, and there has been a flood of foreclosures in recent years. It is not in their interest to tie up their assets on reserves such as foreclosed homes. Many banks have stopped giving out mortgages and have begun focusing their attention on getting rid of their REO. This is because federal regulations only allow mortgage companies to hold a certain percentage of properties on their books. If they exceed the federal limit, hey are restricted from making new loans, which is their primary business. If you catch a bank at the right time, they might accept your offer right off the bat at an incredible price so that they can get these properties off their books and continue with their business of lending out loans. Thus, buyers have an advantage.
The benefit of investing in an REO home is its low level of risk. Buyers can have a peace of mind in knowing that these properties are without title defects because banks would have already removed all its liens or claims against the property before they make REO properties available for sale. You will also know who the actual owner of the home is before buying the property. Furthermore, by the time an REO property is on the market, the previous owner has moved out because the banks have already evicted them prior to the date it was foreclosed at the auction. Homebuyers are able to avoid the stress and the financial costs of going through an eviction process. The move in date will be more certain for those investing in REO homes.
It is good to be prepared with all the possibilities of buying an REO property before conducting your search. Take note of the fact that REO properties have probably been left vacant for months since the previous owner had been evicted prior to the date of its auction. Keeping this in mind, expect to find that many of these homes may require additional repair costs. When it comes to bank owned properties, you are purchasing these homes as is, and most REO properties are non-negotiable in regards to getting the bank to pay for these repairs.
Furthermore, remember that the reason REO properties end up in foreclosure is because their owners were unable to make their mortgage payments, it is plausible to assume then that the previous owners were also unable to pay their property taxes as well. Property taxes follow the property, not the owner; thus, when you buy a REO home, it is a good idea to make sure you know what outstanding taxes and liens are attached to the property. If you don’t do your research, you can end up paying a lot more than you had expected. To find a great bargain, there is some legwork involved.