Understanding REO
By Angela Kleinertski on July 8, 2009
REOs are properties that the lender has failed to sell at auction. At this point, since the home has gone back to the lender, the mortgage no longer exists. The lender also settles such things as evictions, tax liens and homeowners dues. The buyer will also receive the title insurance policies.
The bank or the mortgage company of the bank foreclose on a property . The lender finally gets clear of the hassles and finally hires a local real estate agent. The lender then tries to recover almost all of the money lent on the property.
When the property is being sold as an REO, the bank will hire a realtor and in some cases, evict tenants and perform their own inspections and or make minimal repairs. All banks work differently but most will want to sell the property in the “as is” condition.
In today’s recessed economy, few investors are willing to purchase a house for more than it is worth. Additionally, foreclosure properties oftentimes require numerous repairs and renovations. In most cases it does not make sense to purchase a property at a price above current market value, let alone pour more funds into repairs. Instead, savvy investors are willing to wait for foreclosure properties to revert to the bank.
Banks does not want to own these type of property since having these properties signifies that its a bad loan that the bank has given and is a liability and not an asset.Every time that a bank owns an REO indicating that they are losing money.
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