The Real Estate Encyclopedia
What are the Advantages of Buying a REO?
Category - Mortgage Questions - Foreclosure & REO FAQ's

The greatest advantage of buying a REO property is that buyers may be able to buy a property for a somewhat discounted purchase price and be able to turn the property around within a short period, earning a quick return on the investment.  Investors also buy REOs as a long-term investment and profit from their investment by converting them into rental properties.

Be sure you visit the property and have it inspected.  Although many banks will not pay for repairs, most will allow the buyer to conduct an inspection at their own cost to make sure the condition of the property is acceptable for the price it is acquired.  By conducting an inspection, you have the right to “walk” if the repairs needed are too extensive to result in a profit. 

Banks typically price the property within the local market value and try to earn the maximum return when they sell an REO directly but are typically willing to negotiate on the price for two main reasons: 1) they do not want to tie up money in capital reserves required for a foreclosed property, and 2) the management of such properties is a problem they would rather avoid.

 
Category(s)
Mortgage Questions - Foreclosure & REO FAQ's
Home Buying Questions - General Home Buying FAQ's
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