Tips on Buying Reos: Bank Owned Post Foreclosures
Homes that are acquired by a bank from foreclosure are called REOs: real estate owned. These are properties that have gone back to the mortgage company in the aftermath of an unsuccessful foreclosure auction. You might ask, “Why would an auction on an already deemed to be foreclosed home be unsuccessful?” Well, they almost always are. And the reason is that the minimum bid on such properties would have to cover the costs of all that is currently owed to the bank/lender, and this includes: the loan balance, accrued interest, any attorney fees and every cost associated with the foreclosure process.As you might imagine, what is owed to the bank is almost always more than the value of the property. At the point of an unsuccessful auction, where the minimum bid is not met, the property reverts to the bank as an REO. Now that sell your house quickly the bank owns the property, the former mortgage no longer exists and bank will sometimes even handle repairs, evictions, negotiations with the IRS for removal of tax liens and the payment of any homeowner association dues. Take note that many banks are moving away from paying typical closing costs. Some fees such as transfer taxes, county and state fees, are the responsibility of the buyer and not the bank. There is some strategy to understand when purchasing an REO. The banks/lenders are still all about securing profitable situations and have no interest in quickly dumping off their inventory for a dime- or two. Rest assured, there will be some bargaining involved if you wish to secure a desirable price. Once you make an offer, they will usually present a counter-offer, which may be at a higher price than you expected.