REO properties are now dominating the investment property market and even portions of the regular home buying market.  REO is an acronym for Real Estate Owned properties.  This refers to properties repossessed by lenders or financial institutions due to homeowners defaulting on their mortgages.  For obvious reasons, banks do not want to hold onto these assets and opt to liquidate as quickly as possible by pricing these properties for sale at or below market value.

REO properties are a great option for all different types of buyers.  First time home buyers, second home buyers and real estate investors alike can all take advantage of the superior buying power of REO properties.  Where there is greatness though there is also an opportunity to be bamboozled, so it is up to buyers to practice due diligence to determine the condition of a property and the amount of repairs it will require before making a purchase.
Most REO properties require some level of repair.  Just look at the situation to see why this is true.  If a homeowner was unable to make their mortgage payment it isn’t very likely that they were able to afford to keep up with property maintenance either.  Additionally, foreclosure can leave a home owner quite bitter and this can lead to the owner causing additional damage to the property out of anger and frustration.  Some even steal items from the property that they do not have rights to.  While all of this is illegal, it still happens.

Most financial institutions that handle REO properties do perform repairs to the property to bring it back up to selling condition.  This generally only includes major repairs that could affect a buyer getting an FHA loan or to make the property a non-safety hazard.  The other plus side to the REO properties is that the bank clears most liens against the property before marketing it for sale.

There is one important aspect of buying REO properties that some buyers seem not to believe and it is that the banks have to sell and will sell at any price.  This couldn’t be further from the truth.  Banks have always been in the job of making money and the REO situations are no different.  Lenders are not going to take an enormous loss on any property and generally won’t take a lowball offer that isn’t backed up with a long list of necessary repairs.  If you want to get the best deal then you would need to make the bank an offer on multiple properties together.  This is called a Bulk REO offer.  Only in this situation are lenders more willing to go for a low ball offer.

Working with an experienced REO agent can often be the difference between success and failure when purchasing a REO property.  Dealing with the bank’s loss mitigation department directly is not the best idea.  An experienced REO agent can help you to be sure that your paperwork is order and that you are making the best offer possible.