Positive Aspects of Purchasing REO Properties

After a home goes through foreclosure and isn't bid upon in an auction, it becomes an REO property. REO means Real Estate Owned. This means that the property has reverted to ownership by the lender, and is just sitting there. There are several advantages to purchasing REO properties. Whether you're an investor looking to make a profit or a potential homeowner looking for savings, these homes can be a great purchase.




One advantage of purchasing an REO property over purchasing a property from auction is the ability to inspect it thoroughly. When you're buying from an auction you are on a time limit. You won't have the time to look over every aspect of the property. It's possible that you won't miss any large defects, but not likely. Imagine buying a property only to find a huge structural problem that is going to cost more than the home's value to fix. It's a situation that is easily avoided.




Of course, inspection is also important because REO properties are usually sold "as is." The price is much lower on one of these properties, so the bank is looking to get rid of it with no extra investment. Many REO properties in California may be in good to excellent condition, but there are exceptional cases.




There may be infestations or even terrible plumbing. There are a million ways that a great looking home can hide a fatal flaw, so take your time. Go over every corner with a fine toothed comb. The extra time spent inspecting will pay off when you make the purchase.




In general, the normal fees associated with buying properties do not apply to REO properties. Also, dealing with a bank directly is less emotional than seeing someone evicted from a foreclosed home. You don't have to know details about the family that lived in the home. Dealing directly with the bank is a numbers game. You'll get to the bottom line much quicker with one of these properties, an appealing prospect for any home buyer.




If you're really in the market to make a large investment with potential for huge returns, you can purchase a portfolio of REO properties. This is a great deal for both parties. The lender is able to part with a large number of properties at once. Bundling properties isn't common yet, but the right bank will offer what you're looking for at a great price. Of course, these portfolios often require millions of dollars to purchase, which isn't feasible for small investors.




Single home buyers also benefit from the lower prices of these properties. Connect with others in the real estate community in your area and find out the good deals. Different realtors will deal with banks, and these are the people you need to find. When you do, you'll find that there is a great selection to choose from at a low price.




For both large and small investors, REO properties are a blessing if treated with caution. Remember to inspect thoroughly, and find out what the bank is willing to fix. If it's an "as is" property, make sure that any repairs are worth the investment. If you're not careful, you could quickly end up with a renovation nightmare. Shop around and find great deals that aren't on the auction block.

Kari Shea is a real estate professional with Shea Real Estate & Investment Groupwww.shea-realestate.com.

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Executing the Short Sale Exit Strategy for Pre-Foreclosure Profits

There are plenty of methods you can use to make profits on that short sale property once you purchase it. As a real estate investor you could sell the property, you can also play at being a land lord and rent the property out, or you could lease to own the property to a new homeowner. Plus, there are lots more ways than these to earn money from a Short Sale. All it takes is a little creativity.









Lease Option




A lease option is also a good way to help people with bad or no credit get into a home. Most of your lessees will be people who want a home, but just don???t quite have the credit history or income to qualify for a traditional mortgage. In the process of renting to own with your buyers, you can help them rebuild that credit with a program such as homebuyers1st.com, so they can qualify for a traditional mortgage in a few years and be able to pay you the remainder of the home price in one large chunk. A lease option is a new twist on the old way of buying and selling pre-foreclosure properties. You???ll buy the properties, fix them up and find tenants to lease them to on a lease to own basis. You will eventually get all of your money invested back plus a sizable profit, however, the lease option isn't the fastest way to earn profits. Plus, lease option provides you all the benefits of being a landlord without some of the negatives, since the property will be under the care and maintenance of your buyers as eventual owners of the property. Making inspections to make sure the tenant buyers are not damaging the home is vital to make sure that something small doesn't turn into a big problem.









Simultaneous Closing




The Simultaneous Closing involves buying the mortgage note from the bank and selling it to another investor within moments by using the funds from the end buyer. Then, the original seller to places the name of the final buyer on the deed to the property.






Simultaneous Closings are a great way for investors to make profits without ever using their own money by finding a buyer for the property before they even purchase it. This closing method involves using a title company and having the buyer transfer their payment for the property into an escrow account at the title company. This is an excellent way to buy and literally sell your pre-foreclosure property in a matter of moments.






However, many title companies and even mortgage companies are refusing to perform simultaneous closings on pre-foreclosure properties because of a bad reputation that they carry with mortgage and underwriting companies. Some banks will strictly place in their closing instructions that money from another closing cannot be used to pay off their loan. It can be construed as fraud if not done properly. Disclosure is the name of the game with real estate and as long as things are disclosed, there's usually no issues with fraud.






Buy and Hold




When you buy and hold you become a landlord in a sense fixing up the properties and renting them out to tenants. This is a good way to keep property for yourself and also bring in a monthly income on it. However, you must be willing to deal with the pros and cons of being a landlord or hiring a property management company.






As a landlord you'll have to balance the tightrope of respecting your tenants privacy and rights to a well maintained property, as well as your own need to earn a profit and dealing with troublesome tenants. It's not uncommon for a landlord to have to evict tenants for lack of payment and this can take several months sometimes. It's also not uncommon for the tenants to trash the house before leaving. However, not all tenants are like this, and just want a clean, safe place to live.






As the mortgage note holder on this pre-foreclosure property you???ll find that there are plenty of other creative ways to make profits. You can include a short sale negotiation fee to the HUD (of course, Realestateinvestor.com always recommends outsourcing your negotiation for less hassle). Those who are also Realtors can receive a realtor commission on the sale of the property to your own buyer.






Using these methods you can create a nearly fool proof exit strategy to help you sell that pre-foreclosure property at a profit. Short sales aren???t only about buying the property on the cheap; they???re also about selling the property high or higher than you paid for it!






Real estate investors can find all of the information they need to research buy and sell pre-foreclosure properties right online at Real Estate Investor dot com. All it requires is a few minutes on the site and you???ll see just how helpful it can be for investors new and seasoned.

Colin Egbert is an experienced Real Estate Investor with plenty of short sale techniques to aid fellow investors in their quest to succeed and make huge profits. He's the author of the ebook "Getting Started with Short Sales" providing the tools needed to start your own real estate investing business. Colin is also the CEO of Realestateinvestor.com a website dedicated to helping investors make the most of their business.

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