A Brief Introduction to REO Property Investment

A Brief Introduction to REO Property Investment

Shall you invest in an REO property? If you speak to REO asset managers, you will learn that these properties always get the attention of investors. Investors invest in properties with different intents and purposes. Whatever your purpose of investment is, an REO can be your next big deal. 

If you have never invested in an REO property before, you are likely to have many questions about such properties, like:

  • What is Real Estate Owned Property?

A property that fails to find a buyer after it goes through foreclosure is called a real estate owned property. Currently, the bank is the owner of the property. However, having such real estate properties is not in the best interest of a bank. The source of a bank’s income is the interest it gets on loans. Real estate is a different business. This is the reason why banks are always willing to sell such properties as quickly as possible. An REO property does not generate any money for the bank. The bank has to bear the cost of property maintenance. This is the reason why they work with REO asset managers for REO asset management

REO management companies also help banks in selling these properties fast.

So, if you are an investor, you can also get discounts on such properties. You can work with REO asset management companies or the agents to find an investment opportunity. However, you should be able to figure out if it is a good deal or not. It is important to be aware of the complete process. Keep in mind that banks want to sell these properties fast but they also want to make money. A good deal fits your budget and also appeases the bank.

Understanding the REO Process

When a borrower defaults on a loan, the lender becomes the owner of the property. The property goes through a foreclosure. The lender gets the ownership of the property if the property is not sold in the foreclosure. The following are the three stages of the REO process:

  • Payment Default
  • Auction
  • Bank-owned

Buying an REO property

The following 10 steps are involved in buying an REO property:

  • Search for REO properties
  • Find a financing option
  • Find an agent with experience in REO properties
  • Make a list of properties
  • Get an appraisal
  • Make an offer
  • Property inspection 
  • Negotiation
  • Finalize loan
  • Close the deal

Why invest in REO property?

An REO property investment is beneficial for the following reasons:

  • Discounted prices
  • No outstanding taxes
  • Option for inspection
  • No dealings with homeowners