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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