REO and Foreclosure

Most of the times, REO and foreclosures are spoken in the same breath and used interchangeably. However, there are lines of difference between the two. When one is asked the question of which property to buy, a REO or a foreclosure, the explanation would be tight – and not a very lucid one. Instead, knowing how these two are brought about would help the buyer to decide which would suit them best.

REOs and foreclosures have many similarities, and both are brought about by the same reason of the borrower not being able to match up to the repayment schedule. For both, the principal driving force is to get the property sold of to a new buyer.

REOs usually happen as a result of a property not getting a buyer in the normal process of foreclosures. Therefore, the lender is forced to own the property since there are no takers at that moment.

Usually, most real estate brokers would second the idea of owning a foreclosed property due to many advantages. In fact, many would reason that it is the safest bet for many first time buyers, which would translate into minimal efforts of ownership except for the money and some due diligence. Even statistics back the idea that REO sales are more popular selling methods when it comes to buying foreclosed properties.

Essentially, a REO sale happens by the normal method of selling, whilst the foreclosure sale is usually through the auction method. In the REO sale the lender offers a price that is usually lower than the market and sometimes gives support to the buyers in owning the home. However, in the foreclosure through auction the buyer has to bid for a price and bear the unpaid amount.

In addition, in the foreclosure proceedings the property would be received by the bidder in the ‘as is’ condition; sometimes the eviction of a tenant may also be pending. In the REO sales, the lender usually takes care of the issues like the down payments, paper work, eviction, etc. These advantages make REO sales a much better option than foreclosure sales.

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