Buying bank owned properties There is a lot of interest in buying bank owned properties these days. A lot of information, some good and some bad, is floating around about the subject. Often the information offered is for sale, with the promise that you can make a lot of money with little effort once you know “the secret formula”. The fact is that there are no secrets, and to make money does require effort.
What’s an REO? REO stands for “Real Estate Owned”. These are properties that have gone through foreclosure and are now owned by the bank or mortgage company. This is not the same as a property up for sale at a foreclosure auction. When buying a property during a foreclosure sale, you will most likely pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process. In Hawaii, you must also be prepared to pay with 100% cash in hand if it is a NON-JUDICIAL/POWER OF SALE foreclosure. That could include existing liens and even current occupants that need to be evicted. If it is a JUDICIAL foreclosure the sale is handled by an appointed real estate commissioner. In this case, you must have at least 10% cash in hand and you will most likely have the opportunity to at least view the property (unless otherwise deemed by the court). And on top of all that, you’ll receive the property 100% “as is”. A REO, by contrast, is a much “cleaner” and attractive transaction. The REO property did not find a buyer during foreclosure auction. The bank now owns it. The bank will see to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Do be aware that REO’s may be exempt from normal disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are aware of.
Is it a bargain? It’s commonly assumed that any REO must be a bargain and an opportunity for easy money. This simply isn’t true. You have to be very careful about buying a REO if your intent is to make money off of it. While it’s true that the bank is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it. When considering the value of a REO, you need to look closely at comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the house for resale. The bargains with money making potential exist, and many people do very well buying foreclosures. But there are also many REO’s that are not good buys and not likely to turn a profit.
Ready to make an offer?
We find out about REO, FORECLOSURE and DISTRESSED properties in advance. Please email Foreclosures@OptimumWorld.com if you would like to be added to our Buyer's List. You will receive updates as soon as we do.
Here are some websites that you might want to check out:
PEMCO, LTD *HUD-owned homes in California, Hawaii, Guam & The Northern Mariana Islands
Government Home Sales *Currently the U.S. Departments of Housing and Urban Development (HUD), Agriculture (USDA/Rural Development), and Veterans Affairs (VA) have homes listed on this site. Fannie Mae Owned Properties *Buys loans on the secondary market
Internal Revenue Service *Under authority of the Internal Revenue Code, the property described here has been seized or acquired for nonpayment of internal revenue taxes and will be sold
Small Business Administration *The U.S. Small Business Administration acquired property while administering its loan programs, and it is available for purchase by the public
Buying bank owned properties
Is it a bargain?
