Las Vegas Real Estate Blog

In 2008 REO's are a big part of our buying business. Even if Real Estate Owned (REO) properties looks as an attractive purchase you should understand exactly what you're getting into before you buy them.

A common misconception that people outside of the real estate industry make believes that foreclosure and an REO purchase is the same thing. Although they are similar, they are in fact different; more precisely they are corollaries of each other, with an REO being a direct result of a failed foreclosure sale. To understand the difference between the two and how they vary from each other it is best to define what each is, and their respective merits.

What is the difference between REO and foreclosure?  

Real Estate Owned (REO) properties are different from a foreclosure property in that the bank has already tried to sell it at a foreclosure auction and has not getting any bids. Therefore the bank became the owner of the property. As the bank does not want to keep the REO any longer it makes it a great opportunity for an investor. Not every REO is a good deal, but when you look at an REO you'll commonly find that there is a lot of money to be made.

What should you be aware of when buying REO homes?

When a bank or Loan company takes back a property they then have the property listed as a sellable asset on their books. The role of the bank is to maximize the wealth of its shareholders. If the foreclosed property can be sold to release cash to invest, then this is the main motive for the bank or Loan Company; sell the property and invest the cash.

Keep in mind that each lender has different policies on the loans they lend. Some lenders may not offer loans to homebuyers, while other lenders may not offer loans to investors. In most situations a bank will be looking for a quick sale, and as such will offer many incentives and benefits to prospective buyers. Your financial status should be in good standing before closing the home buying process.

Best types of REO

The type of loan the home was purchased with the first time around is very important. You should attempt to purchase REO's that had a conventional loan, as you will likely get much better deals than you will if you look at FHA and VA loans. Homes that had conventional loans are often purchased for just a fraction of their value, meaning that they can make an investor a lot more money.

Which REO's you should not purchase

The truth is that not all REO are a good deal. In fact, when you see that a home or property is an REO you have to wonder exactly what IS wrong with it. Before getting any further you have figure out the facts behind any real estate transaction. The property had no bid on because no one saw the worth in it.

• Location... Never let a seemingly good deal let you lose sight of how important location is for any piece of real estate that you intend to sell.

There are three big things to consider when dealing with any type of real estate and those are location, location, location. If the home is not located in a desirable part of town, you should really think about how wise of an investment the property may be. 

You need to ask the bank few questions:

• Do not have enough equity?
• Were their IRS, (or any other liens) against it?
• Was the property just too badly damaged?

Take advantage of your right to inspect the REO so that you can see with your own eyes what may or may not be wrong, hire professionals if necessary as well.

If the bank cannot answer the questions then you should become skeptical and walk away from the deal. There are many good opportunities out there. Just do your research before committing to close a deal. 

Do you need a real estate agent to buy a REO property?

You don't need a real estate agent to purchase REO properties or foreclosure auction properties. It is neverthe less recommended that you find a real estate agent to help you through the buying process if you haven't purchased real estate before or if you don't want to do a lot of the legwork yourself.

Read more on the topic: Are You Ready To Buy An REO? by Phoebe Chongchua

ELITE REALTY
7448 W.Sahara Ave. #106 • Las Vegas, NV 89117
Office: (702) 856-6680 • Cell: (310) 529-5360

Website: http://www.lasvegas-buyandsell-realestate.com/ • Email: arina.lv@gmail.com