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What is a REO?

With so many foreclosed homes these days, it’s easy to get lost in the many acronyms flying around. More and more advertisements mention REO properties, but let’s take a step back and look at what exactly is a REO.

REO stands for “Real Estate Owned” — as in the mortgage company owns the property after a failed auction on a foreclosed home. Why are these tabbed as bargain-basement homes? One way to look at it is that the mortgage company is desperate to move the home. After all, it’s foreclosed and failed at an auction, so the longer the property stands, the more the mortgage company loses on it.

There’s a little more here than meets the eye, though. Foreclosure auctions require cash to take care of the loan. That’s a lofty standard and the reason why many auctions don’t get bids. When the property goes back to the mortgage company, the mortgage is eliminated. That means the bank pays for repairs and upkeep, along with taxes and other logistical costs.

Are these homes a bargain? Possibly — but it really is a case by case basis. The bank wants to recoup as much of its many as possible, and if it means negotiating or waiting for other buyers, banks will often play the game. You’ll have to deal with a bank’s REO division, which means you’ll have experts in this field trying to get the best deal for the bank — and that usually means selling the home as-is. Depending on a home’s history and neighborhood, that could be a really costly venture.

The way around this is to do two things before offering. First, examine the property values of the surrounding homes and even nearby neighborhoods. Second, include an inspection clause in your offer and make sure that you know what you’re getting into. If the fixer-upper aspect seems like it will be a boon, then you’ve found a great deal. If it offers more headaches than the savings, you’re better off looking elsewhere.

REO properties can be great deals or they can be difficult, time-consuming sources of trouble. If you need help with this, just ask– Im here to help.

Search for foreclosure homes www.bestreohomes.com

The views published here are the opinions of the writer and are not a substitute for legal counsel.

Posted: Thursday, February 25, 2010 3:01 PM by Israel and Rachel Gonzalez

Comments

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# May 3, 2018 7:26 AM
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