Foreclosures and REO property question – “What is the difference between a foreclosure property and REO (real estate owned)?
A foreclosure is a legal process in which, against the wishes of the owner, real property is sold to satisfy a public or private debt for which the real property has been pledged as security.
Real Estate Owned (REO) is real property that has been foreclosed by a lender and is now owned by the lender.
There’s a lot of confusion between a foreclosure and REOs. When real estate buyers call me asking about foreclosures in most instances, they are really inquiring about REOs and here’s why?
- A foreclosure property goes through a foreclosure auction which is usually held on an assigned date on the steps of a local court house.
- Foreclosure property buyers need to be able to purchase the property for ALL CASH.
- Foreclosure property buyers inherit all unpaid liens, including mortgage debt, taxes, construction loans, home equity lines of credit, and possibly a second or third mortgage.
On the other hand, an REO property is:
- REO property is already owned by the bank.
- Home buyers are able to get a regular mortgage or loan on that property. All cash is not needed.
- REO properties in most instances come with clear title.
Five things to look for when purchasing REO or already foreclosed homes:
- Work with your Pasadena realtor and the Title Company representative to ensure that the title to the Pasadena home you’re buying is free and clear.
- Understand that most foreclosures occur in a down-trending market. Factor in falling home prices into your purchase offer. Look at the current local market conditions and historical trends prior to submitting your offer to the bank.
- Banks do NOT provide many disclosures, so be prepared for surprises. Ensure that all home inspections are completed – don’t forget a sewer line inspection – prior to close of escrow.
- Look for neighborhoods that are not overrun with foreclosures. Neighborhoods with many foreclosures might offer better prices, but will take a lot longer to turn around and the home prices will continue to depreciate.
- If you are looking to buy an already foreclosed property as an investment, be aware that lenders charge higher interest rates on 2nd homes and investment property. Speak to a lender and get fully approved prior to making an offer.
Below is a map and a list of REOs or already foreclosed homes in San Gabriel Valley including Pasadena and surrounding cities:
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Interested in discussing if a foreclosed home is right for you? Give me a call at 626-627-7107.
Originally posted at http://irina4realestate.com/foreclosure-vs-reo-real-estate-owned-property/