REO property has become quite popular because most are listed below market value and can be financed through special programs. An acronym for 'real estate owned' these properties have been returned to the bank due to loan default.
Banks want to sell REO property as quickly as possible; particularly those that have a negative impact on profit margins. With that being said, this doesn't mean banks are willing to take additional losses on properties they own.
Everyone knows banks have repossessed millions of homes in the past few years. Once property is repossessed it is listed for sale at a foreclosure auction. If it doesn't sell, banks take possession and become responsible for securing and maintaining the property.
Banks typically don't engage in repairs or renovations unless required to improve marketability. Bank owned homes are sold in as-is condition, so buyers need to conduct due diligence to ensure realty is worth the price.
Banks list their REO properties with realtors who show the home to prospective buyers and pass along purchase offers to the bank. The process isn't any different than buying other types of properties. The only difference is the bank is the seller.
One popular program for buying REO homes is Home Path Mortgage. This program was developed to liquidate the abundance of foreclosure homes across the nation. Buyers that purchase properties offered for sale at Homepath.com can apply for financing through Home Path Mortgage.
Fannie Mae Homepath properties are comprised of all types of residential real estate including single family residences, condos, and townhouses. Many properties are listed at 10 to 20 percent below market value.
This program is attractive to individuals and real estate investors. The downside for investors is Homepath makes use of a 'First Look' program that gives individual buyers the first chance to make an offer. Investors cannot submit offers until properties have been listed for 15 days.
Buyers that finance through Homepath Mortgage can take advantage of reduced down payments and flexible financing terms. It's important to note that offers presented for less than the list price are rarely accepted. Furthermore, there is high probability that several buyers will be presenting offers. For this reason it can be advantageous to put your best offer on the table.
It can be financially beneficial to explore HUDs Neighborhood Stabilization Program. NSP receives federal grant money each year that is provided to buyers who purchase homes in areas severely impacted by foreclosure.
Many REO homes qualify for NSP grants. Funds can be used to restore the property and can offset renovation and closing costs. This program can be very beneficial for investors because they can apply for up to five grants. Additionally, 25 percent of NSP funds are set aside for investors who buy homes for the purpose of providing affordable housing, such as Section 8.
Investing in REO property as a primary residence or investment property can be a good decision. Not only are properties reasonably priced, many qualify for special financing and NSP grants. Combined, these programs can yield substantial savings.
If you're thinking about buying real estate owned by banks, but uncertain if it's the right choice we invite you to explore our REO property article library. We discuss the pros and cons of foreclosed homes and offer additional resources about Fannie Mae loan mortgage programs and first time home buyer programs.