What is an REO, and is it TIME TO BUY REAL ESTATE?

What is an REO, and is it TIME TO BUY REAL ESTATE?


With all of the media reporting on REO’s I thought It may be important to first consult a Real Estate Investor and a Realtor by trade exactly what an REO is and what it means to the average Bay Area resident. Thanks for joining Green Mortgage Group John. So what is an REO anyways?

REO stands for “Real Estate Owned”.  These are properties that have gone through foreclosure and are now owned by the bank or mortgage company.  This is not the same as a property up for foreclosure auction.  When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process.  You must also be prepared to pay with cash in hand.  On top of all that, you’ll receive the property “as is”.  That could include existing liens and even current occupants that need to be evicted. 

San Leandro Real Estate Agent, John DeMarinis says “an REO, by contrast, is a much “cleaner” and attractive purchase.  The REO property did not find a buyer during foreclosure auction.  The bank now owns it.  The bank will see to the removal of tax liens, evict occupants and generally prepare for the issuance of a title insurance policy for the buyer at closing”.  Do be aware that REO’s may be exempt from normal disclosure requirements.  In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are aware of.

Is an REO a bargain?

It’s commonly assumed that any REO must be a bargain and an opportunity for easy money.  This simply isn’t true.  John DeMarins says “you have to be very careful about buying a REO if your intent is to make money off of it”.  While it’s true that the bank is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it.  It is vital to consult a Real Estate agent with investment experience.  When considering the value of a REO, you need to look closely at comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the house for resale.  The bargains with money making potential exist, and many people do very well buying REO property. Always consider careful research when buying REO’s or any Real Estate.

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