Search Guide

How To Buy Bank Owned (REO) Homes

Jul 23, 2013 - 2 Min read
Real Estate Expert

Essentially, there are three different stages at which you can buy a foreclosure property. Investors and homebuyers can purchase a foreclosure property in the first phase of default — before a foreclosure auction takes place. Secondly, investors can purchase a property in at the public foreclosure auction. And finally, a foreclosure property can be purchased from the bank or lending institution if no one bids at the public sale and the bank repossesses the property.

Once a foreclosed property is purchased by the bank at the public foreclosure auction sale, it reverts back to the bank and becomes a bank-owned REO property. Anyone can buy a bank-owned REO. The challenge for real estate investors is to reach the person who can make the decision to sell the bank-owned property. Each lending institution has different rules and requirements on how they sell bank-owned real estate. Contact the lender and find out what they require to purchase an REO property.

Most banks are eager to negotiate. After all, the lender has the biggest financial stake in a foreclosed property. The lender made an 80 percent, 90 percent, or even a 100 percent loan to the borrower to purchase the property. Therefore, the lender who may have a growing inventory of bank-owned properties is a motivated seller. Lenders want to remove the properties from their inventories. Bank officers in the loss mitigation department will want to work with investors and home buyers because they want to minimize the bank’s loss. Some investors call bank-owned properties repos, which is short for repossessions.

Frequently, lending institutions hire real estate brokers to market and sell their REO inventories. Smaller local banks may use one real estate broker to handle their REO properties. Larger regional and national banks employ hundreds of brokers to handle their inventory of thousands of foreclosed bank-owned REOs.

Buying a lender’s real estate owned property is a lot less complicated, involves less competition and usually doesn’t expose investors to as much risk as buying in other phases of the foreclosure process. Investors should consider working with several lenders.

You might also like
How to Buy a Home at a Foreclosure Auction
8 min read How to Buy a Home at a Foreclosure Auction One of the most important things a real estate investor can learn is how to buy a home at a foreclosure auction. However, there is much more than most people think to the auction process. In order to invest successfully at a foreclosure auction, you need to understand the process from beginning to end, starting […]
How To Buy HUD Homes | RealtyTrac
9 min read How To Buy HUD Homes | RealtyTrac Many real estate investors think the only way to learn how to buy HUD homes is to be a first-time homebuyer eligible for HUD programs, but the truth is that knowing how to buy HUD home foreclosures can be one of the best skills an investor can have. When real estate owners default on HUD […]
How To Buy Pre-foreclosures
1 min read How To Buy Pre-foreclosures Pre-foreclosure is the first stage in the foreclosure process. It begins when a Notice of Default (non-judicial states) or Lis Pendens (judicial states) has been filed against the homeowner due to missed mortgage payments. During the pre-foreclosure phase, the homeowner still owns the home and may be working to cure the default. It is during […]