Real-Estate-Owned (REOs) are properties typically owned by traditional lending institutions such as banks. The properties are repossessed by the bank where the mortgage loan originated through foreclosure after the owner defaults their mortgage payments. The bank then tries to recoup the lost revenue by auctioning the property after foreclosure. If the home doesn’t sell through auction, it will be listed as an REO.
Recently, buying REO properties has become a popular subject in the real estate investment landscape. Indeed, buying REO properties can be an excellent move for acquiring real estate deals for the mere purpose of investment. Besides having its challenges, REO properties offer amazing investment opportunities that you can’t ignore for the following reasons;
- REO properties come at discounted prices.
Financial institutions do not accumulate any wealth by keeping non-performing properties or loans that are giving no returns. For this reason, when a bank repossesses a property, it is on the disadvantaged side in terms of losing money on its investment. Therefore, when a property becomes REO, banks are usually so willing to get rid of it. Additionally, if an REO property serves as a great liability, banks aim to sell it as soon as possible to minimize the losses. As a result, banks are usually willing to sell REOs at low prices, sometimes below the market value. As a savvy investor or an investor with little capital, REOs serves a great deal.
- REO properties come with no outstanding taxes or title liens.
Most real estate investors have come across issues that raise concerns on the property’s legal owner due to outstanding taxes and liens. Outstanding taxes and title liens are critical issues that can block a prospective buyer or investor from taking full ownership of the property. Fortunately, REOs rarely come with such issues.
Once a property has become REO, the bank immediately wipes out any liens and settles any taxes on the property. This leaves no questions or concerns on the status of the property.
- No dealing with homeowners.
When a property becomes an REO, it means there’s no other homeowner, other than the bank. With no homeowner with personal attachments to the property, the process of negotiating for the deal is greatly catalyzed almost to none. This is because buying REOs involves only a buyer and a bank that targets to recoup its losses, not a homeowner who wants to make a profit from the deal. It saves both time and a lot of money for the investor.
- REOs fetch great returns.
For investors who want a property for renting out or flipping purposes, REOs will yield great returns for both. A landlord can buy an REO and rent it out to generate rental income. The landlord will benefit greatly from the cash flow, considering he bought the property at a low price. In the long run, the landlord can choose to sell the property for a higher price than the original investment since it will have appreciated.
Similarly, for an investor looking to buy the house for flipping purposes, investing in REOs is a smart move. Considering REOs sell at a lower price, a real estate flipper can buy an REO, do quick remodeling and sell it for more to make profits. In both cases, both investors will yield high returns from investing in the REO.
Conclusively, investing in REOs is always a smart decision for both experienced and beginner investors. In most cases, beginner investors shy away from investing in REOs. It is time to step out of your comfort zone. The power is now.
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Disclaimer: The views and opinions of Eric Lawrence Frazier are his own and do not necessarily represent First Bank or any organization affiliated with Eric Lawrence Frazier, or the Power Is Now Media Inc. First Bank is an Equal Credit Opportunity Lender. Eric Lawrence Frazier, MBA, is also a Vice President and Mortgage Advisor with First Bank. NMLS#461807 and a California Licensed Real Estate Broker DRE# 01143482. Email: Eric.frazier@fbol.com. Ph: 714- 475-8629.
Eric Lawrence Frazier MBA
President and CEO
The Power Is Now Media Inc.
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