During the preceding three months, anyone who has tried to buy a property would have been advised to look at foreclosed properties. The first time investors with some understanding of the market would have definitely understood that there is a lot of help from the foreclosed properties. Most of the properties are much below the fair priced bracket and are great buys. However, few would have known the differences between short sale and REO properties, or known where to get the best deals. Knowing about it and actually getting the best deal is the gap filled by an experienced agent.
REO means Real Estate Owned. These are properties are owned by lenders, mostly by the bank, posted after an unsuccessful attempt at auctioning. Once the bid is put up, (usually up to the outstanding amount) and there are no takers for the property, the bank has to transfer the ownership legally to its name. Once there are distress signals from the property like delayed or missed payments, the value of the property is quickly determined.
The price of the property is understood by obtaining the Broker Price Opinion (BPO) or by issuing an appraisal. Once the value is determined, the property is put through short sale or a foreclosure. In the case that the property goes through the short sale or foreclosure process, it is not listed under a REO. In the cases where the property doesn’t go through the foreclosure auction, it is listed as a REO. The bank repossesses the property and allows it to go through the normal channels of selling.
The bank will usually remove the liens and other expenses; this “new” product would now be sold through another set of auctions or through professional sellers. As real estate investors or first time homebuyers, it makes a lot of sense to go after these properties. The value to be paid is well below the existing market price and the title of such properties is also very clear.