REO is the acronym for Real Estate Owned. It is a term usually used when referring to a property that has not sold at a foreclosure auction. Failure to sell the property at auction is usually due to the property being underwater, meaning the amount owed is higher than worth of the property.The majority of the larger banks around the country have REO departments that determine the validity of offers, bids, and keep track of sales.
The biggest problem for the common buyer is quickly locating a worthy REO. This can be quite simple. Call the local realtors, making sure you only contact the realtors who are registered Realtors with the NAR. If you decide to deal with the other realtors in your area, who aren’t a licensed Realtor, you may find slim pickings. Many of the independent realtors refuse to share information with each other, making your options shrink, or your work load heavier.
Recognizing a True REO From a Scam
Some of the more deceitful agencies will list a property as an REO, simply to get it more exposure. When you have an REO in your sights, there several ways to determine if the property is actually an REO. When an investor or homeowner is foreclosed, the house is usually left in less than good condition. A typical REO may have trashed floors, carpets, walls, and ceilings, along with mismatched or improperly done renovations. There should, also, be no working utilities, banks usually won’t pay for expenses that are cutting into the bottom line. Look throughout the REO for mold and filth in abundance, in any REO that is a good possibility. Depending on the neighborhood, there may be some unexpected tenets squatting in the property, if you purchase a property under that type of circumstance, the squatters must be evicted as soon as possible to begin renovations.
The Risks of Purchasing an REO
Ironically, some of the risks of buying an REO are the same as the things you should look for. For instance, when purchasing an REO, expect either plumbing, electrical, or roofing problems, or all of the above. REO’s are exempt from transfer or disclosure laws, so be sure you’re positive of the inspection results. REO’s are not for those middle class Americans who want a good house at a cheap price. They’re for the long term investor, who has the cash, patience, and ability to flip such a property. REO purchases and investments are not acts for those who have a weak heart for real estate.
Definition reference wikipedia- http://en.wikipedia.org/wiki/Real_Estate_Owned