Buying REO Properties can be a great outlet for house flippers.
In the business of house flipping, often times expert investors will seek out and purchase many different types of properties. While buying homes straight from the previous homeowner can be great, if that is your only means of finding a property, you might be limiting yourself.
To really thrive in this business, you want to consider diversifying the types of properties you buy. Some popular means of buying short sales, and buying foreclosed properties. However, what many people often overlook is something called an REO property.
REOs are essentially the third piece in the foreclosure family. The first, buying a short sale, is to buy a property from the homeowner before is foreclosed. The second option is to buy a property after it has been foreclosed, usually from a foreclosure auction. The last option is buying REO properties. An REO, or â€œreal estate ownedâ€ property, is a home that fails to sell in a foreclosure auction.
Why Buy REOs?
Buying REO properties can be a great investment strategy because these houses often sell at below market value. Moreover, they will sell below the asking price at the foreclosure auction.
What happens is, if a property fails to sell at a foreclosure auction, the lender, which is typically a bank, keeps possession of the house. However, the bank does not want to hold on to the property because they are loosing money every day that they are in possession of it. Costs like homeowners insurance, property taxes, utilities, and maintenance are all things that the lender is responsible for.
Because of this, the lender wants to get the property off its hands as quickly as possible. They will often sell the house for an incredibly low price for this very reason.
When Is Buying REO Properties A Good Idea?
Buying these properties is the often the cheapest way to invest in real estate. However, you must make sure you do it at the right time. If the market...