REO Property Investing 101

REO or ‘Real Estate Owned' properties offer some of the BEST opportunities to grab a property at a great price. At the tail end of the foreclosure process, REO's are those properties that failed to sell at auction after they were foreclosed upon. If you do your homework and are a good negotiator you can make a killing by investing in REO's in today's volatile real estate market.

There is a reason why there are so many REO properties. In fact most large banks have entire departments dedicated to REO properties. Here's why: most properties that go to foreclosure auction in fact do not end up being sold. Most don't even get any bids. This is because if the property was easily worth more than the mortgage amount that was owed on the property the previous owner would have simply sold it themselves and pocketed the difference. Instead, the auction results in an unsold property and the bank is now left a property on their hands to sell in the open market.

At this stage the bank will go through a process of providing ‘clear title'. This includes removing the loan balance from the property, clearing other liens and any back taxes owed on the property as well as making sure there are no outstanding law suits that might hold up the sale. Often the bank will make minor repairs in order to ensure the property complies with necessary statute and inspection requirements. When the property is sold the buyer will receive ‘title insurance' provided to guarantee that title is clear on the property. This is a huge advantage over the large risks involved in purchasing something during a foreclosure auction.

Before you make an offer on an REO property make sure you do your homework on the property. Keep one important thing in mind; banks are not property management companies and they WANT to sell this property. Often, if they do not receive an offer at a listed price they will be willing to drop their price in order to make the sale. There is tremendous incremental cost for a bank to continue to manage a property and they would much rather negotiate a fair price and take a small loss than be responsible ofr long term upkeep and administrative costs of holding the property. At the same time, don't expect the bank to ‘dump' the property for an outrageously low sum. That rarely if ever happens.

There are many places to find out about REO properties. Most major banks have REO departments and there are real estate agents that specialize in REO sales that have a good relationship with the bank. There are also several websites that specialize in listing REO properties from numerous banks and categorized in areas. For links to these and other great strategies on purchasing REO and foreclosure properties please visit www.PropertyWorkouts.com.