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Foreclosure vs. REO

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By : Roby Hicks    99 or more times read
What is an REO? REO is an abbreviation for Real Estate Owned. At first glance, this may seem just like any ordinary real estate term. However, it refers to the properties that were not sold during the foreclosure sale. Moreover, an REO sale only occurs when foreclosure sale fails. The lender repossesses the property if no buyer was found to purchase it during the auction.

Why would the buyers invest in an REO property then? Many think that the property is problematic that is why no buyer is interested to purchase it. However, this is seldom the case. In fact, in most cases, the only problem of the property is that the previous owner failed to settle his obligations. If you want to decide whether to purchase an REO or foreclosed property, you should first look into the basic components of home purchasing, which are the location, amenities, financing and the like.

In most cases, people would want to purchase a foreclosed home. However, they change their minds after hearing the advantages of purchasing an REO property. Again, the property is not problematic that is why no one purchased it during the auction. There is a lot of other reasons as to why the property is not sold.

Among the advantages of purchasing this type of property is that the process is fast and easy. In fact, this is recommended to most first time home buyers because this is the fastest way to acquire a home. REO guarantees that the buyer will not need to evict anyone from the property because the previous owner has already left. Aside from that, the property is cheaper by about 20% of the market value of the property. This is because the lenders or the banks do not want these assets to stay in their record for long. They want their books to look good for their shareholder, which is why they need to sell the property right away.

It is also risk-free. Aside from the fact that the previous owners left the property, the lender has also acquired the clean title of the estate. This means that you do not have to worry about liens and other restrictions. Additionally, you can negotiate the cost of purchasing the property for a more favorable term. The down payment requested is also lower.

If this is the case, why would many still purchase foreclosed home? This is so because there is no REO sale if the foreclosure sale is successful. In addition to that, the values of the foreclosed properties are very inexpensive, although you need to bid. It will start at a minimum bid which will cover the balance of the mortgage and other fees for processing the foreclosure.

If you have successfully bid, the property will be given to you as is. This means that you will be responsible for evicting present residents. You should also deal with problems on liens and other restrictions. Aside from that, you need to have it checked and deal with any repairs it needs.

As you may have observed, it is best to purchase REO homes, however, you have to keep in mind that if foreclosure sale is successful, there won’t be REO homes.
Find inexpensive home. Check Foreclosed Homes in Chula Vista, Homes in Foreclosure in El Cajon and Escondido Foreclosed Real Estate.

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