Investing in Foreclosures: “REO” is the Way to Go
Source:
http://boiserealestateinfo.net
Publish Date: 9/20/2008
Today we are experiencing one of the most widespread and potentially profitable foreclosure investment markets in American history, but many buyers who want to participate are hesitant, and for good reason. Those with little or no experience can soon become embroiled in a tangle of legal red tape, financial commitment, and dangerous assumption of liabilities when buying foreclosures.
Sometimes, for example, the previous owner owed income taxes or payments to building contractors, and if those debts were secured by the property, you can automatically inherit them when you become the new owner. Because of the treacherous nature of foreclosure purchases, those who don’t know what they are doing can easily buy into someone else’s problems – including tax bills that are greater than the market value of the property itself.
But those who purchase safely can also buy bargain basement priced properties with a powerful opportunity for both built-in equity and long range market appreciation. And while it’s true that most professional foreclosure buyers make their choices based on a plan to resell or “flip” for a quick profit, more and more Americans are buying just for themselves and their families, in order to find decent affordable housing. The recent market deterioration opens the doors of home ownership to a broader demographic, and many foreclosures are changing hands to become primary residences or long-awaited vacation homes, retirement getaways, or income-producing assets.
REO PropertiesAfter a couple of missed payments, mortgage companies begin the legal foreclosure process, which culminates with a public foreclosure auction. The lender may sell it to the highest bidder or may choose to retain the property – if it doesn’t attract a high enough bid – and sell it through a conventional real estate broker. These kinds of foreclosures are known as REO, which stands for “real estate owned by the lender” and they are currently filling up the balance sheets of banks who are desperate to unload them. For foreclosure investors, this creates a situation that is the real estate equivalent of a “going out of business” sale, but without the normal potential for risk associated with foreclosure auctions. REO properties represent one of the best and safest ways to start investing in foreclosures. Unlike foreclosure auction sales – where buyers have to show up with a cashier’s Upscale Homes at Fire Sale PricesAnd although foreclosures in America have historically been the result of unexpected personal tragedy, that too has changed significantly. Many of those facing foreclosure this year simply got caught holding the bag when the market shifted or their adjustable mortgage payments were reset and spiked higher. Brokers marketing REO properties tend to spruce them up to enhance their curb appeal, too. So today’s foreclosures aren’t, for the most part, the dilapidated structures in undesirable neighborhoods of foreclosure markets the nation has experienced in the past, and that makes this particular buying opportunity especially attractive, rare, and lucrative. ###
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check but may have no chance to inspect the house before buying – REO transactions are essentially the same as a normal real estate sale. You can use a Realtor to represent you, hire inspectors to critique the property before you buy, and take the advice of a real estate attorney to guide you through the closing process. You can apply for a regular mortgage, and the bank that owns the foreclosure REO may give you a discounted rate with preferential terms to help facilitate the purchase – which is in the bank’s own best interest.