REO home and Foreclosure home : is there a difference

When somebody is going to buy a house, the obvious issue may appear: is there a difference between foreclosure home and REO property? Property for sale can appear on the market in different ways, but the article below will explain the main options, which make difference between foreclosure property and REO property. The first thing to understand is that REO house is actually a foreclosed house. It may sound somehow strange in the beginning, but let’s look through the whole process of REO appearance. When house owner is not able to do payments to cover his mortgage loan, the house appears in foreclosure list. On this stage of process the foreclosure auction is held, so everybody can attend it and buy a property offered. But if there are no buyers for house, the financial institution (bank) becomes owner of it, and after it happens foreclosed home becomes REO property.

The banks list While auction is running the house is considered to be a foreclosure, so if you buy it, you become the owner of foreclosed house. So what is the main difference between these two terms? As you act as a homebuyer keep in mind, that the main feature, that differs REO property from foreclosure is the responsibility you take as an owner of a house. REO house is clear and free. When the property returns to the bank after being not sold on the foreclosure auction, bank takes the house and all debts, tax liens, fees and all other payments, connected with this property. This is the reason banks have no interest about keeping REO property, this leads to substantial expenses. In some cases bank can't even to cover its losses, because when it was bought, {the price of deal was&it cost&the value was&value of a deal was) much higher, then average one, then house acts as a security in mortgage loan. In this case even if bank will sell the house on the highest price, it will be not enough to cover the losses from this operation.

The best situation for bank is to sell the foreclosure home during auction, then homebuyer gets it as-is. In this case buyer takes responsibility over all payments connected with property, but not financial institution as it happens with REO. Some people buying house on the foreclosure auction think, that it was great deal for them. Of course it may be, but as a rule expenses are much higher, then profit from this operation. So finally buyer may overpay for auction house, and it is much safer to buy house on the market, to have "clean" property without additional expenditure.

For private real estate investors it is much easier and safer to buy REO house, then foreclosure. Foreclosure auctions are risky, so it is better to leave it for professional real estate investors. They know for sure which deal brings money and which doesn’t, though even specialists can make losses.

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How to Find REO Properties

It is not complicated task to find a REO home. One has to keep in mind only one detail, that situation is different on different types of market. To give an example, strong and developing real estate market will offer much less foreclosure homes then falling markets, which are characterized with depression. There is one nice way to find a foreclosure property. Imagine, that you are driving your car throughout the district you want to have house in. You will probably see numerous signs, but now we are looking for simple text, such as: Foreclosure, Bank-Owned, Bank Repo.

Don’t pass this sign by, take a cell phone a call on agent, ask him about the foreclosure list which haven’t appeared on the market yet. It is common situation that foreclosure agents wait for a long time until bank adjust property price. So asking for not listed foreclosure house will will save you a lot of time. The task becomes even easier if you have hired an agent, so he will find for you all the information needed.

Nowadays listings REO properties are available even through internet, you can find them on special websites. Below you will find a list of national lenders who offer REO property listings.


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