Why REO Properties?
For the better part of the time, REO properties are ill maintained and have been lacking in any kind of attention for quite a long period. Also, depending upon the conditions and emotional aspects of the foreclosure process, many REO listings have been vandalized either by the former owner or by people who realize that it is vacant. Home owners who are vexed or angry have been known to flood properties, break plumbing lines, cut electrical wiring, remove all doors and hardware from homes, and just about any other thing that one could imagine. If these aspects are not important to you, and if the price for the home or building is right, then you might proceed without an inspection. An inspection, however, is always strongly recommended.
Most traditional mortgage sources require that a real property is up to code, safe, livable, and worth over the current asking price before a loan is allowed to go through. For these reasons, most REO properties do not qualify for traditional funding methods, and most buyers are forced into making cash transactions or finding private lending companies. With these latter two options, it is understood that the real property may not be currently suitable for living in or for resale. When you begin visiting and inspecting REO properties, you will likely notice that lawns and other fixtures have gone rampant and are not maintained. Don’t be shocked if you find that the same is true indoors.
Some REO listings are not in bad condition at all, but the more recent and better kempt properties tend to do better at auction and rarely make their way to the REO lists. It never hurts to check into every bank list that you can find, however, because you never know what kinds of steals are available, and they usually won’t last long on the market.
Many banks have gathered their own private REO offices for the marketing and selling of these properties, as less conscientious realtors have made a habit of blanketing listings so that the sale is guaranteed to go to their credit. This does not happen often anymore, but is certainly something to consider when you are ready to invest in REO properties. A buyers agent who is signed on exclusively with you is always a great partner to have on your team, and it may not hurt to have a real estate attorney read over documents and agreements for you as well.
You will want to determine about each property what the repair costs will be in order for you to estimate the return on your investment. Most REO properties are merely old and need a bit of cosmetic care and TLC. Should you run into a deal that you cannot pass up, but there are major mechanical issues, you will need to weigh the costs and timing of such repairs against the asking price before proceeding. Whatever you choose to do, there are a great many benefits to the REO property listings available to the public, even for the individual buyer.
