The Differences Between Foreclosures And Reos

Most people get a foreclosure and bank owned or REO property mixed up

. There is big difference between the two, especially when you are buying investment property. The process of purchasing a foreclosure is different from the process of purchasing a REO.

Foreclosures are one option when buying investment property. A foreclosure is a property that has been through the foreclosure process. The lender has given the homeowner a notice of default. A notice of sale has also gone out. The lender is trying to recover some of its losses by auctioning off the home on the courthouse steps or trustee's sale. A real estate agent does not list foreclosures. Once a qualified bidder has won with the highest bid, that person officially owns the property. He or she also takes on any unpaid debts or tax liens. When buying this type of property, interested buyers cannot inspect it before bidding starts. Foreclosures are often sold "as is" and there is no money back guarantee. You must also pay cash for the property when buying it from the courthouse steps.

A REO has also gone through the foreclosure process. However, it remained unsold at a trustee's sale. Foreclosures often remain unsold because they are priced for more than they are worth. If a foreclosure remains unsold, the property reverts to the lender. The lender now officially owns the property. The lender will handle most of the unpaid debts and liens. The mortgage on the property no longer exists once it goes back to the lender. Lenders will list REOs with real estate agents. REOs may be a better option when buying investment property. Unlike with a foreclosure, you can inspect the property before buying it. There also may be more lending options available. However, a REO may not be as big as a bargain as a foreclosure. In addition, REOs may also be sold "as is." Many lenders choose not to make improvements, even minor ones.

Knowing the difference between a foreclosure and a REO when buying investment property can determine which investment is best for your money. There are certain trade-offs if you decide to buy a foreclosure instead of a REO and vice versa. It is important to do research when buying investment property. Knowing the difference and researching the title, pricing, location, costs, etc. on a foreclosure or REO can save you a lot of time and money down the road.

by: Greg Hughes

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