If you’re considering distressed properties in your house hunt in Denver, you’ve likely seen HUD listings as well as real estate owned (REO – also called “bank owned”) properties. These types of properties share some commonalities, but the process of buying them is a bit different. Read on for an overview of how HUD homes and REO properties are different.
HUD properties actually belong to the U.S. Department of Housing and Urban Development (HUD). The HUD is in charge of public housing and community development. While they offer a variety of programs aimed at helping homeowners avoid foreclosure, if that can’t be prevented, HUD sells the foreclosed homes to recoup the loss.
REO stands for “real estate owned”, but in reality, the bank is actually the owner of these types of properties. When the bank forecloses, the lender often attempts to sell the home at a foreclosure auction with the opening bid equal to the loan balance. If the home doesn’t sell, the bank regains ownership of the home.
Both types of properties are typically sold “as-is”, meaning neither owner will be making extensive repairs before selling.
HUD homes are sold through a bidding process. In the initial stage of bidding, priority is given to buyers who intend to use the home as a primary residence. All offers are reviewed at the same time, with the highest bid generally accepted.
Unlike HUD homes, however, REO homes do not offer priority to owner occupants. For this type of purchase, experts recommend providing a good faith-deposit of 1 percent of the purchase price along with your offer. At this time, the bank may accept or counter offer.
If you’re interested in checking our distressed properties in the Denver area, the first thing to do is to find a professional agent experienced in these types of sales. Contact Metrowest today – we specialize in distressed property sales and would love to show you around.