Reos-an Option When Investing In Residential Property
When investing in residential property, there is a great deal of confusion about real estate owned property
. Real estate owned properties are commonly referred to as REOs. Many people believe that REOs and foreclosed homes are the same thing. However, there is a difference between the two.
REOs are foreclosed homes that remain unsold after a courthouse auction. Since no one bought the foreclosed home at the auction, the lender now officially owns the home. The mortgage on the foreclosure no longer exists. However, the lender is still responsible for paying any tax liens and various outstanding debts. If you are thinking about buying an REO when investing in residential property, there are certain advantages and disadvantages you should know.
Unlike buying a foreclosure, most of the unpaid debt has already been paid or forgiven. If you buy a foreclosure and do not conduct a title search, you could be responsible for any liens and unpaid fees on it. Also, you can buy an REO at a great price. Many REOs are competitively priced to attract more buyers. If you buy an REO at a fairly low price and the property values in the area are expected to increase, you can eventually resell the home for a large profit.
However, there are some risks to buying an REO when investing in residential property. The biggest risk is the condition of the home. Lenders tend to sell REOs "as is." The home might be in great condition or it might need a few repairs. Unlike foreclosures, you are allowed to inspect a REO before purchase. Lenders are not required to make any repairs before putting a property on the market. If the damage is extensive and you cannot afford to make the repairs, then it would be best to move on to a different property.
If you are looking for REOs when investing in residential property, various lender websites are a good place to start. Also, think about contacting a real estate investment advisor or a real estate agent to help you in your search. Make sure to do your research of the area before purchasing a REO. You do not want to make the mistake of overpaying. You should also include repair costs in your budget since many REOs will need some sort of maintenance or repair.
REOs are just one option when you are investing in residential property. Make sure to look at each option carefully before you decide which property is a good investment for you.
by: Greg Hughes
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