There are a number of foreclosure terms and situations in the real estate market that most people do not understand. It is not until a home owner is facing a distressed property or foreclosure that some of these terms surface. These terms not only affect home owners, but also potential buyers, mortgage companies and investors. By having a good understanding of the foreclosure process and terminology, it can help save thousands of dollars when searching for a home. This article will detail REO properties and how it can help make some money for investors or save a buyer thousands of dollars.
REO (Real Estate Owned) is an abbreviation for real estate owned property. When a property is foreclosed on, it typically goes through a legal proceeding and then is placed for auction. Bids are taken and the highest bidder gets to purchase the home. In most cases property is bought during this bidding process, but occasionally the Mortgage Company or bank will not sell the property. In simplistic terms, an REO property is one that has been taken back from the home owner, and the bank is now stuck with the property. This can place the loan maker in an awkward situation and even place a financial hardship on them. It is customary, at this point, for the Mortgage Company or bank to place the REO property in the hands of an experienced real estate agent to sell to the public.
Upon placing the home with a real estate agent, the mortgage company waives much of the fees, interest and other costs that they have incurred. This allows the property to be sold for a fair price, therefore increasing the likelihood of a quick sale. This is the goal of the mortgage company, so they are not incurring any more debt than necessary, or carrying the debt for extended periods of time. Many investors look for foreclosed or REO homes to turn into a profit. Because many of these distressed properties need a great deal of work, they can make the necessary repairs and turn a good profit. Some of the homes are in very bad shape and these homes are excellent for investors because of their typically flexible financing. In most cases the low price of the home can well compensate for the repairs and work. Sometimes the home needs very few repairs leaving some foreclosure properties to be excellent values for buyers with traditionally sticky condition loans. Either way, these foreclosure homes are well worth any efforts to purchase for the investor or buyer. It is however, important to inspect thoroughly before purchasing any type of distressed property unless you are an expert at repairs or estimating. The return on the investment must be profitable or at a break even point to make the investment a good one.
REO properties, HUD or foreclosures can be found through real estate agents throughout the states. In many Virginia communities there are groups of investors or realtors that specialize in distressed properties. Since the housing market has weakened with the strained economy, distressed properties are abundant. Whether looking for investment property or home to live in, REO’s are often great purchases..