An REO or real estate-owned home is a bank-owned home that did not get sold at a foreclosure auction. Usually, when homeowners cannot pay mortgages, they either sell the property immediately and give the money to the bank or hand over the property to the bank for foreclosure. The banks then sell these REO homes and try to recover the amount that the previous owner owed them. Read on if you are interested to know whether you should invest in bank-owned homes in Orlando.
How Do Banks Sell REO Properties?
Typically, banks will not want to hold on to REO properties for long on their books as they increase the bank’s risk. If a bank cannot find buyers for REO properties, it could indicate an unfavorable real estate market.
Most REO properties are sold at discounted prices. The bank is only interested in recovering the amount the borrower did not repay. No buyer for any property will indicate that the property has lost its value from the time of the loan issuance to the foreclosure auction.
Most banks prefer selling REO properties in bulk. They sell them at a larger discount than they would if selling them individually. Bulk purchases save banks time and money and make the entire process quick.
How to Find Bank-Owned Homes?
You can try various techniques to find and purchase REO properties. The most popular methods of finding an REO property are given below:
Bank Websites – Most banks have REO departments responsible for getting a home sold as soon as possible. These homes can sometimes get listed on the bank’s website. You can search for the REO section of a specific bank by typing Bank Name + REO online.
Foreclosure Listings – Foreclosure, distressed property, and REO listing websites and services are another great way of finding REO properties. While some services may be completely free, others may give you a free trial followed by an annual or monthly subscription.
MLS – Most lenders have partnerships with real estate agents to list and sell REO homes on multiple listing services or MLS. You can directly work with the bank’s realtor or use an agent to represent you when the property is listed on the MLS.
Benefits of REO Homes
Below are the advantages of buying REO homes:
Lower Prices
Lenders are sometimes eager to get rid of their REO homes. They are only concerned with recovering the loan amount the borrower did not repay. They are not interested in getting a profit out of the property. As a result, you may be able to negotiate concessions like home warranties, buyer benefits, and other points when buying the home. You may also get the home at a price much lower than its market value.
High ROI
Bank-owned homes provide great returns on investment to homeowners. You can buy bank-owned homes at a discounted rate and then lease them out to tenants at market rental prices. With time, you will be able to easily recover the cost of the purchase and get a regular rental income. If you don’t intend to give the property on rent or lease, you can even sell the property at its market price and get a higher return on investment.
No Outstanding Lien Issues or Taxes
When purchasing a regular property, you may have to deal with unpaid mortgages and outstanding property taxes of the previous owner. With REOs, banks clear any liens or property taxes attached to the property to ensure a hassle-free ownership transfer.
Easily Accessible
REOs are easily accessible in comparison to regular homes. You can even ask to see the house, inspect any issues in the property, and get it vacated quickly.
Disadvantages of REO Homes
While REOs have unique advantages, they have a few disadvantages as well. Below are some of the disadvantages of REO homes:
Lots of Competition
Many landlords, investors, and prospective buyers know the advantages of investing in an REO. As a result, you may face tough competition when purchasing a bank-owned home.
Sold As-Is
All REOs are sold in as-is condition. Most of the time, homeowners who cannot pay mortgages will vacate the property in need of considerable repair. Since banks will not spend any money on repairs, you will be responsible for repairing the house. While it may not create an issue for real estate flippers, it can be a cause of concern if you want to live in the home or give the house for rent.
Tips to Invest in Bank-Owned Homes
If you are interested in buying a bank-owned home, below are certain steps you must keep in mind:
Inspect the Property Thoroughly
Since bank-owned homes are sold as-is, you must inspect them thoroughly. A thorough inspection will tell you what exactly you are getting into and will give you an idea of how many repairs the property will need.
Conduct a Title Search
Check the home for outstanding debts and liens. If required, you can hire a title officer to ensure there are no surprises when making the purchase. Banks usually clear any liens and other issues before selling the property but don’t assume anything. Ensure everything is in order before making the purchase.
Negotiate Favorable Terms
Banks typically don’t like to hold on to non-performing assets. However, they will not give away homes that easily either. Offer banks a reasonable offer when negotiating the price. Do your due diligence and substantiate your offer with data.
Finance the Deal
If possible, have financing ready even before you find the REO. Stay in touch with a hard money lender if required. This way, you can submit an offer in cash, effectively taking your offer to the top.
Should I Invest in Bank-Owned Homes?
Investing in REO properties has both advantages and disadvantages. But the positives far outweigh the negatives. If you want to purchase a home as an investment to rent it out and are willing to do some work on the home then an REO property may be a good investment. Whatever the market says, you should consider your needs and requirements before making any decision.
https://www.o-reo.net/ offers foreclosed homes for sale. We are real estate professionals who will help you find REO properties that fit your budget and needs.
Orlando REO Professionals,
1060 Woodcock Rd. Suite 134 Orlando Fl 32803,
407-704-6924
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