Real Estate Owned (REO) 101
An REO is an asset (property) that has been taken back by mortgager/lender through a foreclosure proceeding.
There are several steps to this procedure and the Mortgagee (owner) has an opportunity to re take/keep the property during the process.
The basic steps are:
1) Mortgagee (owner) fails to secure a Short Sale or loan Modification.
2) Lender having already proceeded with foreclosure proceeding during Short Sale process sets an auction date.
3) At auction investors/mortgagee fails to meet/exceed Lenders bid price
4) Lender “takes back” asset (REO)
5) Lender may “shop” asset (s) to institutional/bulk buyers.
6) If asset is not sold it may be listed with Realtor or in house sales team.
Step 6 is where most home buyers see the property listed as an REO, but by this time the property has been recycled/reviewed/rejected/purchased (think sloppy seconds) by many parties (The Pros that I mentioned earlier)
Couple of things to consider in the REO gig.
CASH IS KING…period. If you got it flaunt it, lenders love cash as they don’t have to go through those nasty little things known as appraisals (ahhh, but try to finance something from them and see what they say about appraisals HA! (what’s good for the goose is definitely not good for the gander).
If the property shows any value, (Bueno, Bonito y Barato) prepare for a bidding war that many times takes the property above current market value.
While price may look attractive, many times the condition of asset outweighs the cost of purchasing/renovating from a hard cash standpoint.
Asset (s) may have title issues that may not be addressed by Lender (buyer beware)
So what’s it mean to the average Joe?
REO’s are just like everything else in life….you get what you pay for.
Have any other questions? Drop me a line at javiergonzalezpa@bellsouth.net or call me at 305.582.5085
