What Does REO Mean
A common question I am asked is what does REO mean? REO stands for real estate owned and refers to foreclosure property which has been returned to the bank. Banks hold the title, manage the property and are responsible for selling it. Bank owned homes are sold directly through each lender's loss mitigation department or a designated real estate agent.
Many people wonder what does REO mean in terms of buying properties at reduced prices? While it is true most real estate owned properties are sold below market value, buyers must take in to account repair costs required to return properties to livable condition. Some homes are in near perfect condition, while others are in complete disarray and require an entire renovation.
Banks obtain broker price opinion appraisals to determine fair market value. Many appraisals are obtained through drive-by BPOs, meaning real estate brokers drove by the home but did not enter the premises. These types of appraisals save banks money and should not be counted on to provide sufficient details about the home.
Prior to making an offer on REO homes, buyers should engage in due diligence by obtaining a home appraisal and property inspection. If major problems exist, borrowers can further negotiate the purchase price. Since bank owned homes are sold in "as is" condition, buyers must be aware of potential problems that could end cutting into their house buying budget.
REO properties are a good choice for first time home buyers, real estate investors and individuals seeking an affordable vacation home. Investors often invest in bank repo's for use as affordable rental properties or as rent-to-own homes. Since properties are generally priced lower than other homes in the area, investors can make a decent return on investment by rehabbing the house and selling for profit.
Buying bank owned homes is usually easier than purchasing foreclosed homes. Once banks take possession of the property they are responsible for removing liens and judgments, as well as evicting previous tenants.
Individuals who purchase foreclosure property often find they have bitten off more house than they can chew. Lien removal can be costly and time-consuming and the eviction process can be emotionally-draining. Purchasing a foreclosure home can take several months, while buying an REO home allows buyers to quickly take possession of the property.
One resource for locating REO homes is through the Countrywide foreclosure list. This nationwide list consists of thousands of bank owned properties priced below market value. As part of HUDs Neighborhood Stabilization Program, Countrywide properties are eligible for NSP grants.
First time home buyers may want to seek out real estate owned properties for sale. In addition to purchasing a home at reduced costs, first time buyers will qualify for the $8000 tax credit. Home purchases must be completed by June 30, 2010 unless President Obama extends the deadline.
These are just a few advantages of purchasing repossessed homes. We invite you to learn more about REO properties, first time home buyer programs, financing options and tax credits in our home buying article library. We add new articles each week, so take a moment to subscribe to our mailing list and receive instant notification when new information is published.
Published on March 29, 2010 at 01:56 AM | Comments: 5