Real estate owned properties or REOs provide unique investment opportunities for investors. These are bank-owned properties that have failed to sell at auctions. The process of selling REOs could involve repairs, lien clearance, tenant eviction, and similar activities. These properties have low competition and are below market value, so they can potentially yield high returns.
Buying REO homes comes with risks, though, ones that can cause financial loss. For one, they often require more renovations than typical options. Not to say you shouldn’t buy REOs—here are tips that can help.
Do Extensive Research
Conduct a market analysis to find the best location for your business. Location can significantly affect the property price, occupancy rate, income, and ROI. A good REO property will be in a community with a rising population, a good job market, and low crime rates. It’ll also be near schools, hospitals, development projects, and amenities.
Learn How to Find REO Listings
Besides looking at bank websites for listings, you can also find REOs through listing agents, Multiple Listing Services or MLS, real estate sites, and directly contacting lenders.
If you’re purchasing the property as a homeowner, it’s better to get a real estate agent to help you through the process. Having an agent saves you plenty of time and effort finding properties and negotiating for them.
Get Pre-Approval or Proof of Funds
Buyers paying with cash must submit a Proof of Funds letter to the lender who owns the REO property. Otherwise, you can secure a pre-approval letter from the same lender. People who purchase REOs to flip might also consider hard loans or private money loans to fund their property.
Don’t Skip the Inspection
When buying an REO home, the property inspection is more crucial. These properties are sold “as is,” which means the buyer will shoulder renovations, repairs, and other defects. Before buying, hire a professional inspector to check the house. You need to know everything that needs fixing before you commit.
Run a Full Title Search on the Home
Usually, the lender clears an REO property’s title before selling it. Don’t assume this is true all the time, though—a mistake like this could cause the total asking price to climb. Besides confirming if the title has been cleared, run an independent title search as well.
Meet Your Deadlines
After filling out the paperwork, you can close on your REO property. Note that you could be charged a penalty if you complete the process past the deadline. Fortunately, you can avoid these delays by getting pre-qualified.
Conclusion
You can gain a lot from investing in REO homes. For one, you will be buying from a motivated seller—the lender or bank will likely want to take these properties off their hands as soon as possible. Also, REO homes could be incredibly profitable, especially for house flippers, especially if the property is in a good location.
If it is your first time buying an REO house, it’s best to learn everything you can before you go. Consulting REO listing specialists will make things efficient and ensure that you’re going in the right direction.
Trust Orlando REO Professionals with your real estate investment needs. We are your best source for REO properties for sale in Florida, and our listing specialists have at least seven years of experience in the field. Call us today for more information!