When a homeowner defaults on his or her mortgage payments to a bank, the bank will foreclose on the property and try to sell it at a foreclosure auction
. If the bank can't sell the property at auction, the property becomes what is known as a bank owned REO
(real estate owned) property. For a bank, REO properties
are a nuisance because they cost money to maintain and they tie up money the bank could earn interest on or invest elsewhere for a better return.
For someone looking for a new home to live in, flip, or keep as a rental property, REO, or bank owned, properties can be a terrific investment opportunity. That's because when it comes to REO, banks are eager to sell, so they will omit lawyer fees, interest, unpaid taxes, and other charges that accrued prior to and during foreclosure. This is all money taken off the price of the bank's REO property - a direct benefit to the lucky homebuyer.
One thing to consider when searching for REO properties is the condition of the property versus the price of the property. If the home needs repairs, it will probably be discounted more. However, many people qualify for loans that include repair costs, and after improvements are made on the house, its value often increases. Investing some time and effort in a bank REO property can really pay off in the long run.
Another thing to consider when looking for bank owned property is where to find them and how to know you're getting a good deal. To find the most REO homes in one place, visit Hubzu.com, which has the largest inventory of bank owned property
for sale in the nation with listings from business partners like Ocwen Financial Corporation. This online REO auction marketplace makes it easy for anyone to buy (or sell) REO homes. One of the best and most unique benefits to using Hubzu.com's auction tool is that you can see what other people are bidding on each property. That way, you know you're getting the property at the fair market value.