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Featured Topic: REOREO stands for Real Estate Owned and refers to a property that has been returned to a bank or lender in a foreclose proceeding. In an REO situation, tha bank will usually negotiate with the IRS for removal of tax liens and pay off any homeowner association dues. An REO can be financed through a number of methods including cash, hard money, conventional and FHA. A great way to buy and keep an REO home in Southern California is to rent it out during the downturn and let the renter make your mortgage payment. If care is taken in the analysis of these purchases, a great profit can be realized in monthly cash flow and equity growth over time. Many investors are bidding above list, panicking thinking that the market is at bottom when in reality there are many more REO's to come in the next few years. It is best that an REO investor understand a smaller slice of territory very well than have a vague understanding of a larger area. It's not unusual for some REO homes in Southern California to receive 15 or 20 offers. Sometimes the bank will throw out all but two offers and then ask the selected buyers to resubmit what is called "Highest and Final" offer. It is common to see holes beat into the drywall of REO homes. Many REO investors use a mix of handy men and general contractor to complete their repair jobs. When selecting a buy an hold cashflow property, take care to think about what areas you would like to own homes in 5 years from now. It is important to consider this and not just buy the cheapest deals. HomePath Mortgage Financing is available on Fannie Mae homes and there is no mortgage insurance. REO buyers should be aware of the following FHA loan qualification guideline: Bankruptcy's must be at least two years old, with perfect credit since discharge. Remember that these guidelines are subject to change at anytime and you should stay abreast of current loan programs. REO listing agents generally represent the seller, not the buyer. If the bank REO does not appraise for the purchase price and the buyer is obtaining a loan that requires a 20% down payment or less, the buyer's lender will not fund unless the buyer coughs up more cash or the REO lender discounts the price. Cash buyers don't make offers contingent on an appraisal. One more disadvantage of Bank Owned homes or REO Properties is you will not know about the past of the property, but this can be reduced by doing some research on property in public records. When you make a REO purchase offer, the bank will almost certainly respond with an counter-offer. this is just to show their auditors that they had done everything possible to get the best price, so you should always negotiate REO's to get the best price Many REO experts are involved in wholesaling their REO homes. They will pass along a deal they found in as is condition to another buyer for a nominal fee. REO tip....Take note of the condition of the top sold comps in your area and try to estimate your repairs to the market standard. Over repairing can eat away at profits and under repairing can take your property out of consideration for top buyers. REO Part II: Banks have departments that must maintain these homes, keep the lights on and keep the taxes paid. Banks cannot legally sell real estate directly to the public, so they enlist the services of a real estate broker to list the home for sale. Do a Google search for 'Real Estate Owned' or 'REO'; this will give you a list of websites where you can find bank owned properties. |
