The acronym REO stands for “real estate owned,” and refers to properties that banks take possession of through foreclosure. Buyers and Investors often prefer to purchase REO properties because the owners often sell them at cheaper prices. REO properties also come with their own challenges such as bad condition, more complex terms and conditions, and no assistance during the inspection period.
The main benefit of buying an REO property is the price; these homes are generally listed at below market-value because the banks that own them want to sell them as quickly as possible. But don’t expect to get these properties too low.
REO properties are usually sold in “as is” condition, meaning that the owners will make no repairs to them. And, foreclosed homes often reach the market in bad shape. That’s because their owners often don’t have the money to invest in general maintenance. Other owners, angry at losing their homes, intentionally damage their properties before their bank can take them over. This is why it’s so important to pay for a home inspection before you purchase an REO property. An inspector can tell you what problems a home has and how much it will cost to fix them. Too many costly repairs might make that REO property less of a bargain.
Making an Offer
If you want to buy an REO property owned by a bank, make an offer just as you’d do with any other type of home. You can usually find such properties listed on the websites of major U.S. banks or in regional multiple listing service databases; in the latter case, you’ll need to contact one of our staff members so that we can provide you access to view properties. You can also find foreclosed homes offered through the U.S. Department of Housing and Urban Development and Fannie Mae’s HomePath program. To purchase an REO property owned by the U.S. Department of Housing and Urban Development, you must work with a real estate agent; that agency only takes offers from licensed agents. The same is true of Fannie Mae’s HomePath program. Your agent will make this offer through the HomePath Web site.