If you’ve heard the term “distressed property” you may wonder exactly what that entails. It’s actually a larger umbrella for a few different types of homes. Bank or real estate owned (REO) properties, foreclosure properties, and short sale properties are all types of distressed housing. While there are similarities among all these types of housing, the buying process for them varies a bit. Here we’ll take a closer look at REO properties and what you should know should you decide it’s the right type of housing for you.
Real estate owned properties, or REO properties, are houses that have been seized by banks or other lenders from people who are unable to pay their mortgages. When lenders offer mortgage loans, they see them as an investment, because they will earn money from the interest on the loan. So to salvage their investment, banks foreclose on homes with unpaid mortgages and sell the properties at foreclosure auctions. If a home doesn’t sell at auction, it becomes an REO property.
Once the bank owns the property, it will handle eviction, if necessary, pay off tax liens, and may do some repairs, though sometimes REO properties are sold “as is.” This type of housing comes in all shapes and sizes, and while REO listings may need minor repairs and cosmetic fixes, they are often in relatively good shape.
If you’re serious about purchasing an REO property, the first thing you’ll want to do is get your finances in order and get prequalified for a loan. If you’re really serious about a particular REO, you might consider getting preapproved by the lender that owns the property.
The second thing you’ll want to do is find an agent who truly knows and understands the REO buying process. Like we said, it’s a bit different than traditional sales and an experienced agent will help you navigate the waters. If you’re interested in checking our distressed housing in the Denver metro area, give Metrowest a shout. We specialize in REO purchases and we would love to help you start the process!