Are REOs Really A Bargain?

Well, the answer to that can be quite tricky obviously because a lot depends on how well you negotiate the REO (Real Estate Owned) deal with the concerning bank. Apart from this, existing local market conditions also play a vital role in determining whether or not you will profit from your REO investments. So, if a self-proclaimed bargain hunter tells you that he has made his fortunes in REOs, try not to emulate his actions instantly simply because there are just too many variables to consider. For best results, it is recommended that you analyze the facts on your own and take your own decisions.

The inherent flaw

Most REO investments have an inherent flaw; their existing market worth is almost always less than the amount of loan balance associated with it. This is quite true because had the market value been higher, the owner would have easily sold it off to pay his debts and there would never have been a foreclosure. You also should not forget the fact that a property gets converted into REO only when it fails to attract buyers during the foreclosure auction. When this happens, the property reverts back to the creditor and is termed as REO.

Facts about REO properties for sale

When a property becomes a REO, the mortgage loan associated with it automatically gets nullified. The bank or the creditor then initiates the eviction process and may also undertake repair work if necessary. Negotiations are also conducted with the IRS for the removal of tax liens and the concerning bank or creditor pays homeowner's association dues, if any. As such, when you buy a REO property, you will be entitled to receive a completely new title insurance policy and will also have the rights to investigate the property.

How to make a killing on REOs

You may not always be able to do that obviously because the bank or the creditor will not sell the property until and unless they get a buyer who is willing to pay the right price. However, you need not lose all hope because there are plenty of options available and if you search properly, you can easily get your hands on the best bargains. Moreover, since every bank or lender follows a slightly different strategy, you can be rest assured that eventually you will be able to locate a deal that best suits your needs and requirements.

However, there is a word of caution because banks or lenders certainly know the REO business better than you. Most have a separate department for managing REO properties and as such you will often find it difficult to negotiate on your own terms. For best results, it is recommended that you follow the standard procedure wherein the first thing you need to do is make an offer. As soon as you do this, the bank/lender will make a counter offer, which is always more than your offer. Depending on what you feel is the right price; you can then either stick to your original offer or increase your offer.