Table of Contents
You are about to purchase a property for your first investment. You’ve done your research and know how the market has been performing, but you’re worried it’s not going to last much longer. What should you do? What is the best way to go about finding bargains in this ever-changing industry?
Properties that have been foreclosed on and are now in the hands of a lender are known as Real Estate Owned (REO). To recuperate as much money as possible, the lender sells the homes at a discount. REO properties may be found on websites and auctions, as well as REO banks and real estate brokerages.
Where Can I Find Foreclosed Homes for Sale?
REO properties are attractive to investors since they are often sold at a discount because they are being sold “as is.” REO homes may readily be identified by searching the internet, but they do need some investigation before being purchased.
REO properties are often found in three areas by real estate investors:
1. Online REO directories
From coast to coast, REO and auction sites feature REO homes for sale. They provide a variety of selling options, including auctions, calling a real estate agent, and bidding directly on the website. Some of these websites also provide listings of homes that are in different stages of foreclosure.
Foreclosure.com
REOs, foreclosures, and pre-foreclosures are all listed on Foreclosure.com. The listings include condominiums, single-family houses, and commercial structures, among other sorts of assets. The square footage, number of bedrooms, year constructed, and kind of construction are all included in each listing. They include images, and this site has the most thorough information on the properties of any of the sites featured.
Here are some examples of REO listings:
They also offer a foreclosure chronology as well as links to information about the county in which the property is situated. The contact information for the listing agent is shown beneath each property. This is significant since the agent is the individual who is assigned to see the property and make an offer. It is not possible to bid on a property directly from the website. Foreclosure.com also gives connections to their chosen lenders, but if you’re looking for something else, look into REO finance.
Foreclosure.com offers a free seven-day trial period that allows you access to all of the site’s REO listings. The membership charge is $39.80 per month once the trial period has ended.
Auction.com
REO and foreclosure listings are available nationally on Auction.com, along with short property descriptions. They contain the number of bedrooms and bathrooms, as well as the square footage and year of construction. Pictures of the inside and exterior may be seen on the website. The site concentrates on auctions rather than properties and includes state-by-state auction calendars. They don’t provide any information on the area.
You may contact the site’s customer service number, which is listed next to each property if you have any issues concerning the properties or the bidding process. Only Auction.com allows you to bid on a property directly from their website.
To be a registered bidder, you must first join up, and most properties have a reserve price that must be fulfilled before you are declared the successful bidder, similar to other auction sites. For any of the REO properties on the site, real estate auction financing is not available; cash is the only option, and the auction charge is a minimum of $2,500, or 5% of the sales price.
Below is an example of a search on Auction.com.
RealtyTrac
RealtyTrac is a database of directories for REO properties. It has some REO, foreclosure, and pre-foreclosure listings of its own, but it largely connects to sites like Auction.com and Hubzu. Once you’ve become a member, you’ll have access to all of the property details. This contains images of the inside and outside, as well as the number of bedrooms and bathrooms, as well as the square footage.
Local school ratings, community statistics, environmental dangers in the region, and a foreclosure chronology are all provided by RealtyTrac. They also give extensive market comparisons between the highlighted home and other similar-condition houses in the area. Real estate agents that can show you houses and assist you with the purchasing process are listed on the site.
You cannot, however, bid on a property directly on the website. RealtyTrac provides a 7-day free trial, after which the monthly fee is $49.95.
This is an example of a RealtyTrac REO search page.
2. Real Estate Broker
Investors may identify REO homes with the aid of a real estate broker. Property listings are provided by real estate brokers with information that isn’t necessarily public. They are aware of the house’s most recent sale price and the mortgage company that foreclosed on it. They’ve been inside the house and can provide a detailed account of its present state.
You may look for real estate brokers on Google, ask a friend or family member for a recommendation, or contact your local real estate agent to see whether they deal with REO homes. You should know what area you want to purchase in and what sort of house you desire before calling a real estate broker. You must also have a pricing range in mind as well as a method of financing the REO property.
Large real estate brokerages will have an entire REO section, whereas smaller firms will just have a few real estate agents handling REOs. Brokerages that specialize in REO properties are also available. To list the bank’s REO properties, they work directly with the bank’s REO divisions and asset managers. The Multiple Listing Service (MLS), which is a centralized real estate database that includes real properties for sale in a certain region, is available to real estate brokers.
The REO listings of a real estate broker will look like this.
3. REO Banks & Government Loan Insurers
After you’ve looked via internet directories and/or real estate brokers for REO properties, you may wish to look at REO Banks and Government Loan Insurer websites. These websites have their own REO listings, however, they don’t post foreclosures and don’t provide as much property information as REO directories and real estate brokers do.
Some postings have pictures, while others do not. Each listing includes a contact person who is a real estate agent who can show you the REO property and assist you in making an offer. These sites are all free, but you cannot bid directly on them.
Homepath
Fannie Mae’s HomePath.com provides countrywide REO and short sale property listings. Each listing includes a brief property description that includes the number of bedrooms, square footage, and construction year. They include inside and exterior images, as well as links to the county website for the property.
They include connections to local public schools as well as data about the town, such as average family size. Each property has a listing agent listed next to it, and this is the person to contact if you want to visit the property or simply receive additional information. It is not a bidding procedure, but you may make an offer straight on the site by uploading your contract or having your real estate agent do it for you. The site is completely free to use.
An example of a HomePath REO property listing is as follows:
HomeSteps
Freddie Mac REO homes are for sale all around the country on HomeSteps. It starts with the kind of property and moves on to a short description of the property. They contain the number of bedrooms and bathrooms, as well as the square footage and year of construction. Interior and exterior photos are also available on the website. There are no connections or community information supplied, just a list of public schools.
They do provide home affordability calculators so you can see how much a house costs in relation to your budget. Each house includes the contact information for the listing agent next to it, so you can quickly contact him or her to set up an appointment or make an offer on the property. Although you cannot bid directly on the site since it is free, you or your real estate agent may make an offer.
This is a screenshot of a HomeSteps REO listing page.
REO Banks
REO banks sell a variety of their own REO homes for sale on their websites. During The Process of Foreclosure, they obtained these properties. The major REO banks are listed here, along with where their properties are situated and what sorts of homes they sell.
The following is an example of a bank listing:
Steps to Take After You’ve Found an REO Property
Following the discovery of an REO property, there are six crucial procedures to do. They are crucial because they will assist you in locating a property that you are interested in, making an offer on it, and obtaining the greatest possible price for your REO property.
- Contact a Listing Agent — Make sure an agent or property representative answers all of your inquiries.
- Schedule a Walk-Through — Examine the home in person to determine whether you’re still interested, since internet information and the house’s actual state may differ.
- Schedule a home inspection — While the seller will not be making any repairs, it’s crucial to know what has to be done right away and if there are any major problems.
- Schedule an appraisal — This will determine the value of your house.
- Keep Your Budget in Mind — After you get the findings of the property inspection and assessment, double-check that you are still on track with your budget.
- If everything is in order, have your real estate agent draft an offer on the REO property; this may be done online or via an auction.
Consider Kiavi if you need finance for an REO or renovation. They charge as little as 6.5 percent interest and will lend up to 90 percent LTV and 75 percent ARV. It simply takes a few minutes to prequalify online.
The Process of Foreclosure
The Process of Foreclosure starts when a borrower defaults on their mortgage payments. The lender files a public default notice and attempts to collect the balance of the loan. The process is important to understand so you know the steps leading up to the REO stage and can follow properties through these steps until they become REOs.
The process varies by state but below are the 3 main steps of The Process of Foreclosure:
1. Pre-foreclosure
The Process of Foreclosure begins when a borrower defaults on a mortgage loan. The amount of default time varies by state and per your loan documents. After the default occurs, the lender files a Notice of Default which states that the borrower has not made their payments by the predetermined deadline.
Because he or she ceased making mortgage payments, the borrower is now in pre-foreclosure. Before the foreclosure, the borrower has the option of paying off the remaining debt, completing a short sale, or selling the property. A short sale occurs when a lender agrees to allow a borrower to sell a property for less than the amount due on it. The borrower is not authorized to profit from the sale and may be liable for taxes on the shortfall.
2. Bankruptcy
If the borrower does not take any of these procedures to correct the problem, he will be forced to file for bankruptcy. The forced sale of a property via a legal procedure is known as foreclosure. The lender tries to recoup the loan sum by selling the property that served as collateral for the loan.
The timing of The Process of Foreclosure varies by state. During this time, the borrower can still short sell the property or pay off the balance owed. These options are available up until the property goes to a foreclosure sale.
After a Notice of Sale is issued, a foreclosed property is required to sell.
This is an order made by a court that directs a public auction to be held in which the foreclosed property will be placed up for sale and bid on.
A courtroom or government building is generally where the transaction takes place.
The unpaid lender has the option to bid on the property using his unpaid note as collateral. The property is also up to public bidders who have registered. Foreclosed properties are sold at auctions at reduced rates, although depending on the kind of foreclosure, the property may be sold Subject To. This signifies it’s being sold with a lien attached to it. It will be accompanied by whatever lien is indicated as being subject to. The lien will be transferred to the person who acquires the property.
3. REO
REO properties have already gone through the pre-foreclosure and The Process of Foreclosure and are now owned by the lender. That is why they are called REO, or Real Estate Owned. If they were put up for auction, they did not sell and now the lender wants to sell them to get them off their portfolio.
Once the REO stage is in effect, the borrower cannot get the property back. The only way to get the property now is to buy it for the lender’s current asking price. REO is the final step in The Process of Foreclosure.
The Bottom Line
Now you know where to go for REO properties: online REO directories, real estate brokerages, REO banks, and government loan insurer websites. Each of these portals offers distinct options for property research and purchase. Take your time, do your research, and select an REO property that suits your needs.
When you’re ready to start browsing for REO homes, Foreclosure.com offers a free seven-day trial period. In your state and price range, you may look for foreclosures, REOs, and pre-foreclosures.
