Foreclosures are happening at an alarming rate, and so are the number of homes, that banks are getting them back , because they did not sell at the foreclosure sale. These properties are then called bank owned, repo homes, real estate owned properties or reo for short.
It works like this. The lender takes the house back, and then lists it back on the market with a real estate agent, hoping it will sell. Real estate agents will typically list the properties higher, than they should hoping to make a higher commission. When the bank puts them back on the market ,sometimes, they will be priced very low, and sometimes high. Often times these homes were damaged by the previous owners as they were going to lose the homes. This could determine the high or low price. Real estate agents also help decide what the listing price will be. Reos can be inspected and combed over to see if they match what you are looking for.
You can bet, that the bank will make every effort they can to get as much money as they can. Often times, they are so blinded by greed, that they make bad decisions and will end up holding a property for years, because they unwilling to be flexible on the price or the terms. For smart investors Reo properties can be a very lucrative investment. The reasons why, are because in some markets investors, can afford to pay cash and get a really good price and then do some rehab work and sell the property. Of course owning the property free and clear had its advantages. Knowledge and skill is what leads to profit. Most people think its luck, but that does make a person consistent profits.
Investing in an REO property often begins with equity. Banks first settle all the liens related to the REO properties for sale, allowing it to own the property completely. Banks then calculates all other expenses that need to be spent on the property and later comes up with a final price for REO properties for sale. This calculation is done to even out the total sum of balance of mortgage and other expenses incurred on the property.
Reo property investing is not without risks. If you are relying on the skills of a contractor, a real estate agent , then you could be let down by both. A contractor could quote you a price of $10,000 and then surprise you with a price of $20,000. That could ruin all of your chances of making any money all together. I prefer real estate investing, that is low risk, high profit and quick turnaround , that does not require the services of a real estate agent. When you have the right know how, you can start easy and work up. Almost everyone can afford to start with $200 and turn it into $4,000 and the wash and repeat.
Having the know how and skills to eliminate all non essential middleman can out you in a position to make good money from your investing. Take an honest assessment of your knowledge and skill sets and then decide if Reo properties are your cup of tea.
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