REO’s can be a good opportunity, but as with any other real estate purchase, it depends on the details of location, condition and comparable properties. But first, for those of you not familiar with the term REO let me explain. REO (short for Real Estate Owned) is when a Bank or other Financial Institution takes back a home via Foreclosure sale. A Foreclosure occurs when the home owner gets too far behind in their monthly mortgage payments, and the Lender files what’s called a Notice of Default. In Orange County, the home owner then has 3 months to pay the Lender all of the back payments that are due (called Arrears), and keep the monthly loan payments current. If the home owner fails to do this in the 3 month period, then the Lender files what’s called a Trustee Sale notice. The home owner then has just 3 weeks to pay the lender off in full for all of the arrears and the loan balance due. If this does not happen in the 3 week period, then the subject property is sold at the Orange County courthouse to the highest bidder for all cash on the spot (No loans, no investigation, no contingencies). If there are no takers at this open bid auction, the the subject property is officially Deeded back to the lending institution, and the property becomes an REO.
It may take the lending institution anywhere from 1 to 4 months to place this REO property back on the market for sale, usually with a local Realtor who is experienced with REO sales. This REO property is then listed in the local Orange County MLS just like any other property for sale.
Now to answer to original question… Are REO’s a good deal for a Buyer ? Sometimes they are and here is why. Banks are not in the business of owning homes, but to lend money. REO properties hurt their financial balance sheets for they are a non-performing asset (no mortgage income nor rent income). Therefore they are usually motivated to sell these properties in a reasonably short period of time. The second reason the Banks are motivated to sell sooner rather then later, is that in some neighborhoods, vacant homes are sometimes subject to vandalism, or just simple detrimental acts of nature (ie: freezing temperatures), thus potentially costing the Banks even more money. The third reason why REO’s can sometimes be a good buying opportunity is that many of them are in need of some repairs… from minor tender loving care, on up to a Major Fixer Uppers. And Fixers can sometimes be a good buying opportunity assuming that the Buyer is fully aware of the needed repairs and can cost effectively have repairs done.
How does one then determine if an REO property listed for sale is a good deal ? Well, just like any other potential purchase, the Buyer, or the Buyers agent should conduct a comparable analysis of similar homes that have recently sold in the neighborhood. If the property can be purchased for less then those comparables, minus the cost of repairs plus a little bit extra for any unknowns, then that property may qualify as a good deal.
We have many years of experience in finding, negotiating, repairing and selling REO, foreclosure and Fixer-upper homes. Feel free to call us anytime at: 949-388-3396 or email us at: Info@OCRealtyGroup.com Feel free to visit our website to receive a free list of distressed properties (bank REO, foreclosure, Shot Sale) for sale in Orange County. If you are a Bank or financial institution looking for a local Realtor in Orange County with REO experience, please visit our website at: Orange County REO Sales.
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