What is an REO? – Real Estate Owned Properties

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During the housing market down turn around 2007, millions of home owners suddenly found their homes were edging towards negative equity and despite interest rates dropping to historically low levels, many homeowners still went under and could no longer afford to keep up their mortgage payments.
This brought about foreclosure and lenders would often be forced to seize the home and repossess the property after it did not receive any monthly payments from the homeowner. What this meant was that thousands of homes across America became real estate owned, or REO. For those new home buyers, and even investors that have begun springing up, there are suddenly great choices of properties available.
But is it more difficult to buy a seized property than it would be to purchase a regular home that has been maintained and lovingly lived in? Usually potential home buyers will avoid buying into REO properties because there are a number of negative issues that frighten potential homeowners away.
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It is not uncommon to find REO homes in a state of disrepair, lawns that have not been manicured and mowed, windows that are boarded up and utilities like gas and electric not working. Sometimes the amount owed on the home happens to be more than its market value; this will immediately scare potential buyers off. But this is not always the case – some REO properties are auctioned off at ridiculously low prices and even if there is some maintenance work to be done (as there so often is) then it still works out to be a real value for the money.
If the lender simply holds onto the property as an asset value, it is not going to be making the lender any profit or money, so selling the home – even at a very low cost – is so often an option that lenders will consider. This is a win-win situation for buyers, but how does a home get into this state in the first place?
A home goes into a state of distress as soon as the homeowner fails to keep up with the mortgage payments. Usually if more than three payments are missed then foreclosure process starts to take place. The next stage is the equity has to be determined, and to achieve this we obtain a Broker's Price Opinion (BPO) or order an appraisal.
Contact us for more information on Real Estate agents that specialize in REO properties in your area.
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