When a bank takes back a property as a result of foreclosure, the home becomes what is known as a Real Estate Owned (REO) property. Since banks aren’t really in the business of owning property, it’s possible to buy REO properties for a discount, or at least at fair market value.
When a bank has to take back a property, they want to sell it as soon as possible because physical “assets” look like liabilities on their books. At the same time, the bank wants to make as much money as possible on the sale of the property to recoup the loss they experienced in the foreclosure.
For both home buyers and investors, bank-owned properties and REOs offer opportunities that are not available in the pre-foreclosure and auction phase of the foreclosure process. Consider the following advantages if you’re thinking an REO property could be right for you:
1. Bank-owned properties are usually sold at below-market prices – or at least at fair market price – with great terms like low down payments and low interest rates.
2. Buying bank-owned properties involves less risk and less competition.
3. Foreclosures that are owned by banks are usually clear of any liens that may have been recorded against the property.
4. Since the seller of REO homes is also the lender, you can negotiate with the bank to have them pay for all or some of the closing costs.
5. Bank-owned properties are usually vacant because the banks have evicted the previous owner, saving the investor or homebuyer time, money and emotional toll involved in the eviction process.
In areas where prices are high and inventory is low, REO properties can help house hunters become homeowners, but only if you have a pro on your side. If you’re considering buying an REO property, give Metrowest a shout. We specialize in these types of sales and would love to help you start the process.