Real Estate Basics: REO (Real Estate Owned)§
Definition§
Real Estate Owned (REO) properties are assets that a lender, typically a bank, holds after an unsuccessful attempt to sell them at a foreclosure auction. These properties are often sold through traditional real estate channels and may be attractive investment opportunities due to potential discounts and motivated sellers.
Examples§
- Residential Properties: Single-family homes, condos, or townhouses that have been repossessed by the bank due to the prior owner’s inability to keep up with mortgage payments.
- Commercial Properties: Office buildings, retail spaces, or industrial properties that have fallen back into the bank’s possession for similar reasons.
- Multi-Family Units: Apartment buildings that were taken over by the lender.
FAQs§
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What is the difference between REO and foreclosure?
- Answer: Foreclosure is the process where the lender attempts to recover the amount owed on a defaulted loan by selling the property securing the loan. If the property does not sell at the foreclosure auction, it becomes Real Estate Owned (REO).
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How can one purchase an REO property?
- Answer: You can purchase REO properties through traditional real estate transactions. They are often listed by the bank or through real estate agents that specialize in distressed properties.
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Are REO properties cheaper than other properties on the market?
- Answer: Often, REO properties can be acquired at a discount because the bank is looking to recoup any losses quickly. However, they can require significant repairs.
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What are the common risks associated with buying REO properties?
- Answer: REO properties may need extensive renovations, have liens, or carry additional costs. It’s crucial to perform due diligence, including property inspections and title searches.
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Do banks finance REO properties?
- Answer: Yes, banks and other financial institutions do finance the purchase of REO properties. They might even offer better terms to facilitate the sale.
Related Terms§
- Foreclosure:
- The legal process by which a lender takes control of a property due to the borrower’s failure to maintain mortgage payments.
- Short Sale:
- A sale in which the bank allows the property to be sold for less than the outstanding mortgage balance.
- Distressed Property:
- A property that is under foreclosure or being sold by the lender.
Online Resources§
- HUD Homes: hudhomes.com
- A portal for buying REO properties owned by the U.S. Department of Housing and Urban Development.
- RealtyTrac: realtytrac.com
- An online marketplace for foreclosed and bank-owned properties.
References§
- U.S. Department of Housing and Urban Development (HUD): A resource for regulations and listings of REO properties.
- RealtyTrac: Provides statistics, market data, and listings for foreclosures and REO properties.
Suggested Books for Further Studies§
- “The Book on Investing in Real Estate with No (and Low) Money Down” by Brandon Turner
- “Real Estate Investing for Dummies” by Eric Tyson and Robert S. Griswold
- “Foreclosure Investing: Learn the Basics & Buy REO Properties” by Royce Anderson
