Is it possible to purchase an REO using a lease option?

Question

I don't have a ton of capital or credit and am looking to start investing using a lease option.  Can I lease a short sale or REO?

John Corey · Answer

REO - Real Estate Owned by the bank. The borrower has already lost title to the lender. The lender generally wants nothing to do with a lease option. They just want to sell it. Unless they can not find a buyer, they will not consider anything creative. Even then, they really want the cleanest path to a full exit. A lease option does not provide much in the way of certainty that the property will be sold. The bank will drop the price to force a sale before they are going to take on a lease option. The banking regulations are heavily biased towards banks flushing out any REOs and a lease option causes the opposite to happen (the property stays on the bank's books as the bank would still be the owner).

Phil Z. · Answer

You want to Lease a Short Sale that is going into foreclosure and will be bank owned soon?  That's not a good idea.

Bank Owned properties are for sale, not Lease.   If you want to Lease Option, then look for homes marked as such (REOs will never be).

Andy Mirza · Answer

@Lee Burns Yes, it is possible. If the lender that foreclosed is a bank, your chances of a lease option are close to zero. If the foreclosing lender is a private investor, there's a chance of doing a lease option based on what their objectives are. Dealing with a private lender is completely different than dealing with a bank.

Lee Burns · Answer

Thanks for that insight, Tom and John.  I'll get back to the search from a different direction; was just curious.

Tom S. · Answer

@Lee Burns  In general, no.  Typically any REO's are handled by the banks in-house realtor, who will list it on the MLS for maximum exposure and bids.

Is it possible to purchase an REO using a lease option?

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