All about: REO real estate

REO (Real Estate Owned) is a property owned by the bank after a failed foreclosure bid. Most foreclosures are not sold on the auction block since there are too many costs involved. At the foreclosure auction, the bidder must pay for the mortgage, additional liens, foreclosure costs, interest and late charges owed. If there are no offers, the property reverts to the bank and becomes an REO.

Bank owned homes

A bank owned home or REO is handled by the REO or loss and mitigation department. The bank will handle everything to do with the sale until they turn the property over to a listing agent. The bank in most cases will have brokerage firms that they deal with on a regular basis. First, the bank will want to evict the tenant and make any repairs necessary for sale. In some cases, the bank will totally renovate the home to improve the sales value, as per the suggestions of the listing agent. Remember that the bank wants to sell for market value or more. Many times the word REO causes multiple bids and the bank may counter higher than market value and offer to finance the deal. Make sure to have researched the property and area thoroughly before making a bid.

Home foreclosures versus REO

If you see a website that offers free foreclosure listings, this means that you have a list that will offer you the opportunity to bid at the auction. In order to purchase a home, you must pay for all liens and costs against the properties. Home foreclosure listings are available on free sites such as HUD. HUD foreclosures are available and easy to purchase. HUD offers easy financing loans through the FHA, with little down payment and fantastic terms and bonuses. HUD homes are backed by the government and will never revert back to the mortgaging bank. A bank foreclosure is one where the bank has bid on the property and paid off the additional liens so that they can market the property and make money. If there is no money to be made, then the bank won't bid. Pre-foreclosure listings are the ones that are available prior to the foreclosure auction. Short sale properties are examples of pre-foreclosure listings that can be bid on prior to becoming an REO or foreclosure.

Bidding on REOs

REO or bank owned homes are bid on the same way you would with a normal purchase- by making a written offer, countering and making contingencies to complete the transaction. REOs are always sold in "as is" condition. Make sure to include a contingency for a home inspection and the right to cancel escrow if the inspection is unsatisfactory.
Source: Realestateabc.com