Reo Properties

Written by Jeremy Horelick
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REO properties are one of the best-kept secrets in real estate. REOs, or real estate owned properties, typically boast discounted rates as well as 100 percent safety because a) they represent failing investments to their holders, and b) they're controlled by qualified sellers, namely banks. The majority of REOs are foreclosures on homes whose buyers simply couldn't afford them. When this happens, properties are often put up for auction, but even then there's no guarantee the proceeds will settle the outstanding debt held by the lender.

Since banks are in the business of managing money first, they're loath to carry heavy debt or underperforming (not to mention non-performing) assets. This can mean a reduction of anywhere from five to 25 percent for a qualified buyer. Even if you have no interest in holding REO properties, you can capitalize on them by flipping them to future buyers at a higher price. This can be one of the smartest short-term real estate investing strategies.

REO Properties--A Well-Kept Secret

Another benefit of REO properties is that potential buyers need not wait around to inspect the premises. This is because there are no tenants whose schedules must be considered. The bank makes it as convenient as possible for you to check out the home, appraise it on your own, and survey possible damage. Frequently, infrastructural problems in REO properties will bring their cost down even further.

If you're just starting out in real estate, an REO is a popular way to get your proverbial feet wet. Contact your broker and let him or her know of your willingness to purchase REO properties, as that is an avenue he or she may not have originally considered. Succeeding in real estate is often a matter of exploring opportunities your fellow investors are ignoring, and REOs are a shining example of this.


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