REO Homes – Real Estate Owned Property

There are a number of phases that a property has to pass through to become repossessed by the bank or lender in terms of an outstanding debt for a mortgage which has not been paid. These are pre-foreclosure, then auction and the final step REO. What actually happens is that there is no high bidder for the property at the auction, so the property legally becomes owned by the major lien holder which is the bank where the underlying loan is situated.

REO means real estate owned, banks and government departments in the US have huge numbers of REO’s on their inventories, as the foreclosure crisis continues to snowball out of control. It is not envisage that much will change in the near future either as more and more people go under with their mortgage repayments.

This has created a buyers market and home buyers are able to get very good discounted property. Much of this property is in need of repair too and further discounts can be negotiated with the banks because of this. Banks do not like playing landlord so not many of them actually fix their property when it is in need of repair. To them, this is like throwing good money after bad, they are already responsible for property tax and a whole load of other costs they don’t need.

A house standing empty is a accident waiting to happen as it attracts vandals, thieves and in some instances even squatters. If you happen to be contemplating the purchase of an REO, you will be doing the bank and the neighborhood a favor. Empty houses falling into disrepair with untidy gardens are not only lures for criminal activities; they bring down the value of all the other property in the neighborhood.

REO’s can be purchased to live in, to be repaired and resold at a profit, or repaired and rented. With all the foreclosures taking place, there is a great demand for rental property, and this is one way of creating long term wealth. They are great for your tax purposes at a little thing called depreciate is allowed for owners of rental property, so even if the property is appreciating in value, depreciation can be claimed on your tax return.