REO homes are real estate owned homes that are often offered for purchase at a highly competitive rate. The idea of an REO home is often associated with bank foreclosures that are then offered to buyers in the hope of recouping at least most of the investment made by the bank in the property. These bank owned REOs usually involve property where a default on an outstanding mortgage exists. Depending on the circumstances, an investor may be able to acquire the property well below the current market price.
Real estate homes that are put up for sale after a bank foreclosure are sometimes sold at an auction. When this is the case, the bank that currently holds the title to the property often is mainly interested in recouping any remaining investment that was made in the original mortgage. Any costs associated with the foreclosure are also often included in the calculation for the starting bid at the auction. The date and time for the auction is announced to the general public, and any investor who meets the credit qualifications may be allowed to bid on the REO homes listed on the roster of items to auction.
Purchasing REO homes is one method of obtaining a first home at an excellent price. For candidates with excellent credit or the liquid capital to complete the purchase with no delays, the savings can be significant. People who wish to create a network of rental properties often acquire REO homes in order to expand the rental business and offer more homes in desirable neighborhoods.
REO homes do not have to be sold by the bank at an auction. Many financial institutions maintain a listing of foreclosed properties and offer them for direct sale to qualified candidates. For this reason, it is often a good idea for anyone wishing to purchase REO homes to talk with a bank about properties currently held in foreclosure. There are also businesses that monitor foreclosure activity and provide information to land speculators and others who are interested in increasing their real estate holdings. These services are often provided in exchange for a fixed fee or a percentage of the final purchase price.
Since REO homes are bank foreclosed properties, it is often in the best interests of the banks to provide terms and conditions that will attract qualified buyers. This often includes smaller down payments as well as a break on the interest rates for any financing needed by the buyer.