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REO property is real estate that is owned by the bank.
When a property goes into distress status, the lender must then try to determine the value of the property. This is usually done by obtaining a Broker Price Opinion (BPO) and/or an appraisal. If the equity amount is equal to, or higher than, the amount of the loan to that lender, the lender may elect to participate in a short sale or initiate foreclosure proceedings, with the hope that the sale will garner funds to cover their exposure.
Most foreclosures do not result in bids, however, since the outstanding loan amount is generally higher than the value of the home. At that point, the lender will then place the property in and classify it on the books as REO property, whereby it is then considered a non-performing asset. This is not looked upon favorably by the bank’s auditors; thus, the bank will aggressively: 1) try to sell the property directly, 2) market the property in conjunction with their REO asset management department (if they are large enough), or 3) coordinate the sale through a real estate broker within the community who specializes in REO properties. I have participated in a number of REO closings and am familiar with the entire process.
Since REO properties are owned by lenders, there are no longer mortgages on them. In addition to instituting an aggressive sales campaign to rid these properties from their books, the banks must also conduct evictions (if applicable),manage repairs (which, in many cases are numerous and costly).
As a potential purchaser of such properties, you need to understand the goal of the lender: They want the best possible price. Your offers may be countered and will more than likely have to be reviewed, approved and accepted by several individuals and companies. It is a time consuming, patience-testing process. As such, you need to work with a respected Realtor, one who is exceptionally familiar with the process of purchasing an REO property. I have represented many purchasers in their quest for obtaining REO property. As with the purchase of any real estate, you should have applicable inspection terms to allow due diligence if you are not able to do so prior to making an offer.
There are a number of very attractive REO properties currently on the market on Hilton Head Island and in Bluffton, but they sell quickly. I would be happy to answer questions you may have regarding REO properties. Please contact me for further information at BillTrue.com or on my cell, 843-384-9088.
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