REO Vs Foreclosure

An REO (Real Estate Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction. You see, most foreclosure auctions do not even result in bids. After all, if there was enough equity in the property to satisfy the loan, the owner would have probably sold the property and paid off the bank. That is why the property ends up at a foreclosure or trustee sale.

Foreclosure sales begin with a minimum bid that includes the loan balance, any accrued interest, plus attorney's fees and any costs association with the foreclosure process. In order to bid at a foreclosure auction, you must have a cashier's check in your hand for the full amount of your bid. If you are the successful bidder, you receive the property in "as is" condition, which may include someone still living in the property. There may also be other liens against the property.

Since what is owed to the bank is usually more than what the property is worth, very few foreclosure auctions result in a successful sale. Then the property "reverts" to the bank. It becomes an REO, or "real estate owned" property.

REO Property For Sale

The bank now owns the property and the mortgage loan no longer exists. The bank will handle the eviction, if necessary, and may do some repairs. They will negotiate with the IRS for removal of tax liens and pay off any homeowner’s association dues. As a purchaser of an REO property, the buyer will receive a title insurance policy and the opportunity to investigate the property.

A bank owned property might not be a great bargain. Do your homework before making an offer. Make sure that the price you pay (if you are successful) is comparable to other homes in the neighborhood. Consider the costs of renovation, including time to complete them. Do not get caught up in a ‘bidding war’ and pay over market value. It is an old myth that “foreclosures” are a bargain.

Property Condition

• Familiarize your self with Dept of Housing 9 Steps to buying a home. Follow this sound advice and you will come out much better. Click here http://www.hud.gov/buying/

• For your protection read "get a home Inspection" GOTO step #7 http://www.pueblo.gsa.gov/cic_text/housing/inspection/home.htm