Many home buyers searching for a good deal and low prices are lured by foreclosures or pre-foreclosures. What they may not realize are the possible drawbacks and repercussions associated with bidding on a foreclosed home.
For instance, if you are the successful bidder on a property in foreclosure, you are responsible for removing the current occupants of the home. This may not be an easy feat considering they are probably angry and disgruntled that they just lost their home.
You may also not know what you are getting into because many of the homes auctioned in foreclosure are offered sold "as is" and you will probably not get to see the home before purchase. And the disgruntled previous owners may retaliate on your newly purchased bargain by trashing the place before you evict them. For example, it is not uncommon for angry sellers to smash out walls, sell appliances, and rip out the copper pipes and wiring to sell them as scrap metal.
With all that said, you may prefer to purchase an REO property. REO homes, or a real-estate owned property, are homes that are already owned by the lender. The property was acquired by the lender/bank through a failed foreclosure process. The bank ends up owning the property when nobody at the public auction bids enough to cover the amount owed against the property. There are two types of REOs: program and non-program property. A non-program property cannot be reasonably repaired or has been improved to a point that it will no longer qualify as modest under section 502 regulations. A program property is eligible for financing under the section 502 programs or one that can be reasonable repaired to be eligible. Read more about program/non-program property at http://www.rurdev.usda.gov/ga/treo.htm.
It is important to note that banks do not like holding REOs on the books and often try to liquidate them as quickly as possible. Since most markets are currently in extremely poor condition you may be able to find a great deal.
REO are often the best way to buy a distressed property for a variety of reasons:
- The liens are already out of the picture and owned by the bank. This means you will only have to deal with the bank and the bank's agent to negotiate the transaction.
- Taxes have been paid and settled
- You are not subject to auction deadlines and can ultimately buy the property at your convenience.
- REOs can be inspected before you close the deal, an option you don't have with foreclosed properties
- Typically, REOs are restored to a sellable condition, while many foreclosures are often in dilapidated conditions.
- Banks or lenders that own the property may allow for repairs, restorations, and financing.
- In slow markets, you may be able to purchase an REO at a great value
Siddique is real estate investor for many years and president of http://www.butterflylister.com
Source: www.articlecity.com
