Benefits of Buying a Bank Owned Property (REO)

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REO stands for real estate owned. This term is used when referring to a home that has gone through the foreclosure process, failed to find a buyer at the auction, and is now owned by the bank.

One of the benefits of buying a bank-owned REO property is that investors can purchase the home free of title liens and other claims. Lenders generally expunge all second and third liens, as wells as delinquent taxes, HOA and mechanics’ liens. Another benefit of buying an REO property is that they are generally vacant. Investors can save a tremendous amount of time and energy because the eviction process has been taking care of by the bank.

Not all REO properties are available to the general public. Banks typically like to sell these properties to investors that buy million dollar portfolios of REO properties at one time. Scales of economies work in favor of both, the bank and the investor(s). Banks can move hundreds of properties at one time saving them time and money. The investors get a portfolio of homes at a substantial savings as opposed to buying them one at a time. Some of these portfolios start at as much as $5 million.

There are many opportunities for everyday investors to take advantage of these REO properties on a single home basis. Every city has realtors that work with the banks to list and sell their properties. Networking within your investor community can lead to these relationships. REO properties are great homes for investors to buy because they are generally paying below market for the home, and there is a lot of inventory and selection.

Financing REO properties is the same as any other investment property. Plan to contribute at least 10% or more toward the down payment. Do your due diligence to properly cash flow your investment; with this you will be able to weather any market volatility in the future.

Note from editor: For a directory of Banks offering REOs, visit our Bank REO homes page. Get involved in our REO discussion forum to discuss anything to do with these bank owned properties. Finally, if you’re interested, we also have a page with useful information about the foreclosure process.

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  1. Nice article, I didn’t know that REO’s were sold in a bundle like that. I haven’t looked for one myself, but I thought they could be bought very easily by individuals, guess I was wrong.

  2. Bank owned properties are one way to go, but don’t forget about FSBO’s and even turn downs on hard money deals. These properties are on the market too and oftentimes you can nab 1 at a great price below market. Anyway, that’s just my 2 cents.
    Warm Regards,
    Rob Lawrence

  3. Great informative post! This will be a growing section of the market place over the next several years. Investors need to take note of it and start doing thier research today so that they are ready. What a timely article!

  4. Real Estate Resource on

    Excellent post. Yes those are the advantages in buying a REO properties. In REO you can avail the benefits of low property prices, low down payments and interest rates.


  5. In most cases, the bank that owns a foreclosed home only requires a portion of the outstanding balance to reconcile the debt on a mortgage loan. This means that bank owned homes are generally available at up to half off the real market value of the property.

  6. Thank you for allowing me to post this comment on your site. If you visit my site and post a comment I will approve it thereby providing a linkback to your site from mine.

    On this occasion my opinion is that the banks should be stopped from enjoying the remedy at law foreclosure. They, the banks are the cause of the problem, they knew what they were doing, they knew that these jumbo loans they were granting were going to go south and they knew that the federal government would bail them out with tax money to some extent provided by those being foreclosed against. I for one think the entire matter stinks of home cookin’.

  7. Someone mentioned to me that real estate was a great investment to make because people would always need space. I like what you said about how there are many opportunities for investors to buy bank owned properties, and that more often than not the space has been prepared and cleared before selling. It makes sense that someone wanting to turn a profit off of their investment would want to do something like this because they would make an initial investment and immediately have properties that they could make income from.

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