Sourcing Bank Foreclosures and REO Properties

Whether you’re in the market for your first new home or your tenth, you’ll discover that there are a lot of new options available to prospective home buyers. You’ll find traditional buying options, online home auctions, and other choices a realtor can explain to you. One buying option you may not have thought of, though, is that of REO properties.

Bank REO sales occur when a bank is unsuccessful in selling bank foreclosures at auction. This usually happens because the value of these properties is less than the amount owed to the bank. In such a case, the bank will attempt to sell a property without auction, generally at a lower price. This is usually done by employing a realtor to sell the property.

Pay careful attention to the condition of the REO property that you want to purchase, because many bank foreclosures require significant maintenance or repair. Some of these properties can be fixed up inexpensively and quickly, while others may require extensive renovation which can eliminate your profit margin on the deal. So you must examine the property before reaching your decision to buy.

There are several places that a prospective or current investor may find bank owned homes. First of all, banks themselves often have search tools on their web sites where you may search for a property in your location, or the location you are interested in. These sites generally let you filter your search by price, amenities, and other factors.

Another way of searching for bank owned homes is by looking through third party listings. There is a plethora of third-party and independent web sites which also will give out property data. As with all web sites, one must be cautious. Most of these sites can be trusted, but not all of them. Make sure to use your best judgment at all times.

When you make an offer on a real estate owned property, the bank will usually make a counter offer. Plan for some bargaining to get a price that is acceptable to you. While negotiating, be sure to mention any repairs that are needed. Upon buying, you will get a policy for title insurance. Above all, do not fall into the trap of being so fixated on a particular property that you end up paying full price or more. Think things through, and you’ll be set.

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A critical element to real estate investing is having a source for great deals. One option that you may not have looked into is that of bank owned real estate or REO properties. If a bank fails to sell its “bank foreclosures” at auction during the foreclosure process, it will commence an REO sale and this is where bargains can be had. Banks like to get rid of the property they own quickly; since they are not in the business of owning real estate it is unprofitable for them.

- Scott Roemermann

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