Repossessed homes are properties that have been foreclosed by lenders, creditors or government agencies because the homeowner (or mortgagee) failed to make mortgage payments or property taxes on the property. Also called bank-owned foreclosures or real estate owned (REO), repossessed homes are in great demand today because of the growing number of foreclosures and declining prices. Generally banks, private institutions and government agencies repossess the homes of delinquent borrowers and sell them to the general population.
When lenders repossess homes they need to sell them quickly at auction — or through other means — in order to reclaim the money lost by the delinquent loan. For first-time homebuyers and investors, repossessed homes that have been foreclosed upon by the lender offer many opportunities.
Frequently, lenders have hundreds — and sometimes thousands — of repossessed homes they are seeking to sell at discounted prices. Repo properties are great deals because they can be bought at or below market value. Lenders want to get their money back quickly and they often reduce the asking price significantly.
There are many ways to purchase repo properties. But buyers of repossessed homes need to be careful because most repossessed homes are sold “as is” and do not come with any warranty. Moreover, many repossessed homes are in desperate need of repair because the previous owners did not properly maintain the property. And some repo houses are in terrible locations. Still, many investors and homebuyers are interested in snatching these repo fixer-upper properties. While deals can be had on repossessed homes, prospective buyers need to do their homework.
Repossessions are rising because many investors are not buying properties at courthouse auctions, sending the properties back to the banks, creditors and government agencies that originated the loans. Moreover, many homeowners are facing a tighter credit environment, reduced mortgage competition and tougher refinancing conditions as banks continue to tighten lending standards to recoup their battered profit margins.
There are so many repo properties that lenders are hosting mass auctions nearly every weekend in California, Florida, Michigan, Nevada, Arizona and other states, where banks are cutting their losses from millions of dollars of bad debt. In fact repossessed bank-owned properties are so popular now that realtors nationwide are hosting repo home tours, filling small buses with repo buyers and taking them to foreclosed homes.
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