Friday, June 18, 2010

Why Invest In Reo Properties Rather Than Foreclosure Properties

Real estate owned or REO properties go back to mortgage companies or banks after they are unsuccessfully sold at foreclosure auctions. Most properties on auctions never make it to a successful sale. They become REO properties after the bank or mortgage company repossesses them again.

The foreclosure sale usually begins with a minimum bid. The minimum bid for the foreclosure sale includes the loan balance, any accrued interest, additional attorney's fees and other costs associated with the process of foreclosure. When you bid at a foreclosure auction, you need a cashier's check in your hand for your bid's full amount. If you are successful, you will receive the property in its present condition. That means that you may also receive the property with someone still living in it. In addition, there may also be liens against the foreclosure property.

However, most foreclosure properties are seldom sold because the total worth of the property is lower than that of the total amount owed by the original owner.

When the lending company is not able to sell the property at an auction, the property comes back with a different name. These properties may now be called REO properties.

Once the banks repossesses the property, the borrower's mortgage loan is eliminated. In some cases, an eviction is necessary if the occupants of the property have not yet vacated the house. Some repairs may also be done on the property in order to make it more attractive to potential buyers. After the eviction and repairs, the bank will negotiate with the IRS to remove any tax liens. When a buyer purchases the property, he will receive an opportunity to investigate on the property.

If you are planning to invest on real estate properties, investing on real estate owned properties would be the best idea. However, not all of these properties are sold at bargain prices. Research is recommended in order for you to get the best deals. Usually, private investors offer the best deals for REO properties.

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