If you are getting involved with real estate investments, looking for distressed properties/ foreclosures. .. you may have heard the term REO without really knowing what it refers to and how it could play a part for all future investments
What exactly is a REO after all?
REO is actually just an acronym that stands for real estate owned by the bank. REOs aren't all that common because most banks do not want to get stuck with these properties.
How a property does become a REO?
It is simply when a bank forecloses on a home, it is requires by law to hold a public foreclosure auction. Nowadays, because of the current housing crisis or perhaps other reasons the home may not get any bidders at the auction, and the bank will end up owning the property. It is when the bank ends up owning the property it is then known as real estate owned by the bank, or an REO.
An REO sometimes is referred as a foreclosure . . . in reality a property is a foreclosure for only a short period of time. .during the action and the judicial process that transfers the deed of a property to the bank
Why a Bank Does Wants To Get Rid Of Their REO's?
Banks normally do not want to own property, which is not what they are set up for. Basically, an REO is the sign of a bad loan that was given by the bank and the REO is becomes a huge liability, not an asset. Every month that a bank owns a piece of property means they are losing money by paying maintenance, taxes, insurance while the property remains vacant and vulnerable to vandals.
It's no wonder why banks price these properties at rock bottom prices.
Another problem for some bank is that they are not used to having to deal with the fixing and selling of properties. Banks don't have contractors at hand for general repairs or maintenance, so they are at the mercy of contractors that may charge them too much for the services due to the fact they are out of state and not warty of normal repair estimates.
What do you expect?
For a contractor to be contacted by a bank where they have ALL THE MONEY. .they are getting charged RETAIL RATES even for the simplest repair work order.
So, know we know why banks hate REO's and. .
If you are an INVESTOR, now you know why you should set your sights purchasing REO's
Most investors know that homes that need some work done to them usually are the biggest gold mines. REO's are the leverage they are looking for. REOs are generally a very attractive business deal for these investors. For those that know how to do it right, there is a lot of money to be made in REOs.
How can you find REO's?
REOs aren't hard to find because banks want to get rid of them as quickly as possible, and advertise them to the best of their ability. Some banks use REO property management companies that specialize in REO's and in general foreclosures and short sales.
Savvy investors simply need to connect with a company that specializes in distressed properties to establish a good connection. These companies know who are the investors that are moving fast. They get first notice.
As a Broker that works with investors, a lot of times, I choose just a few to get them exposed to the best deals. . because I appreciate the fact that they are ready to move and I'm ready to sell the next deal that comes without wasting my time with lookers and wishy-washy buyers.
Choose the proper REO Property Management Company to take advantage of their experience and connections. .prove yourself and if they accept you. .you will get access to the best deals.
If you are looking for any assistance in the Maryland, DC and Virginia market for REO's Foreclosures, Short Sales and HUD Properties
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Need help right away? Just call 240-426-5754