REO Properties Versus Foreclosure Properties

Real estate owned or REO properties are properties that go back to the bank or mortgage company after an unsuccessful attempt to sell them at foreclosure auctions.  Most properties on auctions never make it to a successful sale.  These properties become REO properties after they are repossessed by banks or mortgage companies. 

A foreclosure sale always begins with a minimum bid.  The minimum bid includes the loan balance, accrued interest, attorney’s fees and any costs associated with the foreclosure process.  When you bid at a foreclosure auction, you need a cashier’s check in your hand for your bid’s full amount. If you are successful, you will receive the property in its present condition. That means that the property may still have someone living in it.  There may also be liens included against the property.

However, most foreclosure properties are seldom sold because the total worth of the property is lower than that of the total amount owed by the original owner. 
When the lending company is not able to sell the property at an auction, the property comes back with a different name.  These may now be properly called REO properties.

When a bank owns the property, the mortgage loan ceases to exist.  Sometimes, the bank may force the original owners to vacate the property.  Some repairs may also be done on the property in order to make it more attractive to potential buyers.  The bank will also negotiate with the IRS to remove tax liens on the property. If the property is bought, the buyer is given the chance to investigate on the property.

If you are planning to invest on real estate properties, investing on real estate owned properties would be the best idea.  However, not all of these properties are sold at bargain prices. Research is recommended in order for you to get the best deals.  If you want the best deals, you may want to purchase REO properties from private investors.