REO Properties

Whether you’re in the market for your first new home or your tenth, you’ll discover that there are a lot of new options available to prospective home buyers. You’ll find traditional buying options, online home auctions, and other choices a Realtor can explain to you. One buying option you may not have thought of, though, is that of bank owned properties.

When buying real estate owned properties, take note of the condition of the property you are buying. Many real estate owned properties that are priced low may need substantial repairs. In most cases, these repairs can easily be completed without lowering your profit margin. However, there will be some properties you should not consider because the associated repairs would be too costly. Be somewhat cautious but realize these properties that require some work often reap the greatest reward.

Current and potential investors can find bank owned homes from several sources. Banks often have search engines on their web sites that allow people to look for properties in different locations. Searchers can use price, amenities, and other factors to narrow down the selections so that they can find properties that look like good investments.

Other ways to find bank foreclosures include going to third party listings. There is a proliferation of independent and third party Web sites who will also provide information about properties. With all Web sites, however, be careful. Many of these sites are trustworthy, but not all are. Use your best judgment when dealing with third party listings.

Often when you make an offer on a bank owned property the bank will counter offer. Expect a period of price-haggling and negotiation to get to a final acceptable price. During the negotiation process, be sure to mention any repairs that are needed. Upon purchase you will receive a policy that covers title insurance. Do not fall into the trap of becoming so enamored of a particular property that you pay full price or above. Negotiate and talk things over and you will be good to go.

Every successful real estate investor has good sources of property deals as a key part of his arsenal. One option that you may consider is that of bank foreclosures and REO properties. Properties are often sold cheaply at this stage because they did not sell during the foreclosure process and once they are owned by the bank they are simply an expense that needs to be removed from their accounts.

Advantages And The Disadvantages Of REO Properties

There are advantages and disadvantages when it comes to buying REO properties. One advantage of buying a REO property is most REO properties are below market value. The reason for this is REO properties are properties that are owned by the bank. Since the bank is liable for the taxes on the property they will be more than happy to sell it to you at below market value. Another advantage of buying REO properties is there is less competition. Not all real estate investors know about REO properties.

One last advantage of REO properties is that REO properties are easy to find. Most banks have a number of them and will love to sell them. One disadvantage of buying REO properties is when you buy REO properties, you buy them as is. Usually you will have to call the electric the gas and the water companies to get them turn on.

A next disadvantage of buying REO properties is you will have to pay for all the repairs yourself if the property needs any. It is important to know what in the property need to be fixed before you buy the property.

One last disadvantage of buying REO properties is that you will not know about the past of the property. One way to overcome this is to do some research on the property. A good place to look is the public records. When it comes to buying REO properties it has its advantages and it disadvantages. With the information you read here you will have some idea what they are.

HUD Homes - Your Guide To HUD Home Listings

In today’s real estate market it doesn’t matter if you dream of buying a home for yourself or you're an investor looking to make money. The fact is - the market for buying HUD homes is as high as it has ever been. With more than a million HUD homes expected to hit the market this year you will certainly want to be able to find them

Five Common Mistakes Made Buying HUD Homes

You may have gone by a house and saw the orange stickers on the front door or windows. You looked at the sign stating this was a HUD homes for sale. It also said to contact a local real estate agent. You looked around the property and thought this is what you have been looking for as a home for yourself or as an investment. The problem is you have not bought a HUD home for sale or you really don’t know what they are.

To begin with HUD homes for sale are HUD foreclosed homes. They are homes that have been financed by an FHA loan and the loan has gone into foreclosure. The HUD foreclosed home has been assigned to a Marketing and Management Contractor to service and market the property.

There are a lot of interest in HUD homes for sale by both home buyers and investors. They also are lot of mistakes made in buying HUD foreclosed homes. I am going to list 5 common mistakes made buying HUD homes for sale.

1. Finding a Real Estate Agent.
I am listing this mistake in buying a HUD foreclosed home first because I think it is the most common and the most costly mistake. You probably think all you have to do is called any real estate agent or one that you have used in the past. It is my opinion that 95% of real estate agents have not sold a HUD home for sale or worst yet; most real estate agents don’t even know what one is. Buying a HUD home for sale is not anything like buying a home from a home owner. You need to search for a real estate agent that is experienced in HUD homes for sale.

2. Paying too much for the HUD Foreclosed Home.
The HUD home for sale is listed at what HUD calls “Fair Market Value.” It has been appraised by a FHA appraiser. My experience has been that the list price of a HUD foreclosed home is within 20% of market value either too low or too high. Again that is another reason you need an experienced real estate agent in HUD foreclosed homes. The agent should do a Competitive Market Analysis of the property. An experienced agent also will be able to determine the lowest bid that HUD will take for the property.

3. Inspection.
You should have an independent inspection done on the property. Most HUD homes sale will have what HUD calls a “Property Condition Report.” The Property Condition report is similar to an inspection and it gives you a pretty good idea of the HUD foreclosed home. You still need to have an independent inspection done.

4. Sold “As-Is” Condition
. All HUD homes for sale are sold in “AS-IS” condition and HUD means AS-IS. They will not do any repairs! So when you make a bid on a HUD home for sale, you should adjust your bid amount to reflect needed repairs.

5. Closing Costs.
HUD will pay up to 5% of the purchase price for certain Buyers’ closing costs. The 5% must be included in the initial bid and the key word is “certain” closing costs, not all. Again, I know I am repeating myself, but an experienced real estate agent in HUD foreclosed homes would know which closing costs HUD will pay. For example, your winning bid on a HUD home for sale was $100,000 and you asked HUD to pay 5%($5,000) of your closing costs. HUD will only pay certain closing costs and those closing costs only came to $2,000. You would LOSE $3,000($5,000-$2,000).

Buying HUD Homes for sale can be very profitable if you can eliminate the costly mistakes. Common mistakes that can be avoided by doing some research and finding an experienced real estate agent in selling HUD foreclosed homes.

HUD Homes For A Dollar?

1) You can buy a home from the government for $1.
Did you really think you could? Sadly, most people that enter their credit card numbers on those flashy investment websites, or call in and order that expensive As Seen on TV package actually think they can. HUD does have programs which allow charities, city, and county governments to buy properties at $1, but there are no programs for investors or home buyers which allow this.

2) HUD homes are in the worst neighborhoods in the city.
Not true at all. HUD homes can in fact, be found in even the most exclusive areas of the city.

3) HUD homes are usually falling down, or have been condemned by the city.
Again, not true. While there are certainly some houses in very poor shape, the vast majority of houses are in remarkably good shape.

This is a huge myth. HUD gets their homes when a home owner defaults on an FHA insured mortgage. People from all walks of life lose houses everyday. The number of HUD owned homes in middle class neighborhoods would astound you. The next time you see a website offering information on $1 Government homes, you’ll know better than to click on that blinking box! If however you are interested in a fixer-upper, HUD may have a house for you.

  • Was listening to a radio show yesterday on foreclosures and they were interviewing the San Diego City attorney who is trying to implement some new regs on foreclosures and workouts making both lenders AND borrowers more responsible. The interviewer mentioned and the fact that it is (I think) based in San Diego.

    Well, you could literally hear the attorney sitting up on that comment. He said to the affect that anyone just walking away without attempting to do anything more was just as irresponsible as lenders not willing to even consider loss mitigation.

    "We will be investigating this site immediately."
    - steele in minnesota 05:31:55 09/27/08 (12)
    • It looks legitimate and they have an afiliate program.

      They also have FAQ' page:
      11. It sounds too good to be true, how do I know this isn't a scam?

      A. While there are many scams out there dealing for foreclosure, this is not one of them. We do not buy your home, we do not have you sign over your property to us. We provide a service and legal information. The service is to help you fully understand how the law pertains to your particular situation. Once your home has gone into foreclosure, your default becomes public record and you will receive a bombardment of advertisement to save your home and avoid foreclosure. Beware of companies that claim they can stop foreclosure or want you to make your monthly paymens to them. Please click here to see our Press Page
      Foreclosure rescue scams are deals that proclaim to "save your house" or "pay your mortgage." Don't be fooled. In one foreclosure scam scenario, you - the homeowner - surrender the title to your house thinking you'll become a renter and buy the house back over a few years. For the most part, you'll lose your house and won't be able to buy it back... and the scam artists walk away with all your equity. Sometimes homeowners just sign a bunch of documents, not even realizing they've signed over ownership of the house. See our "Walk Away From Scams" page for more details.

      The key point is they're selling information rather than trying to capture one's equity or home. - Paul 21:01:10 09/27/08 (11)
      • They "look" legit? What website is going to "look" illegit? As for having affiliates, the first question the comes to mind is, are you one of them?

        Quoting a website's selling points (and any internet newbie realizes that is what most FAQ are) doesn't give any credibility. Not picking on you but it does seem to be a commercial.

        My reporting of what this City Attorney office is doing is simple. The head attorney said that they will be investigating this organization in light of the new city statutes that will be going into place in the near future. But his immediate reaction was that any site that suggests "just walk away" could get alot of former homeowners into trouble in his city (and many others are starting to follow suit). This city, if the new statutes are inacted, will be holding borrowers equally accountable for empty buildings. You can walk away, you just can't hide :>)

        I have examined dozens if not hundreds of websites like this. Believe me, they pretty much all look good. It's called marketing. And it is just as much to pull in affiliates as to pull in consumers.

        So a question that increasingly comes to mind. Can an affiliate be held accoutable if a program turns out to be less than legit?

        My attorney colleagues say, yes.

        Our State Attorney office just shut down some 5 or 6 foreclosure rescue companies doing business in Minnesota. Believe me, all their websites "looked" legit.

        So I tend to take things with a grain of salt. The FBI says that scams are coming out of the woodwork right now.

        Hey, maybe this one will pass muster. Just have to wait and see. - steele in minnesota 05:59:10 09/28/08 (10)
        • Steele, all good points.

          No at this very minute I am NOT an affiliate! I did request information on the program. My interest is peaked!

          I not only looked at the website and its FAQ's but many, many reports from various radio, TV, news interviews conducted over the last year which are on the website. San Diego's DA is a little late to the party. Others have already questioned what they are doing. Can things still come up? Sure they can.

          What I saw is a company selling information to people that have no clue how foreclosure works. Answers to questions that they could get in this very forum.

          They aren't looking to acquire anyone's deed. They aren't telling people we'll stop your foreclosure just pay us x dolars. WHat they are saying is hey, there are OPTIONS people have in regards to their loans.

          Are there error's on your HUD 1 papers at close of your escrow. Were interest rates on your TIL accurate?

          Were all the "I's" and "T's" crossed?

          How long can you stay in the home before being evicited. How does the foreclosure process work?

          Though the name suggests "You Can Walk Away" is addressing people that have the financial means to pay their monthly note. Yet, do they have the moral obligation to pay??? I say they don't!

          A deed of trust / mortgage is a contract to pay with all the legal aspects of time, security and clauses with that in clude "default."

          Thers is no clause I know of that says a person has to pay if they have the financial means to pay.

          If you specifically bought the home as an "investment" property and now that investment is upside down. Why would you keep the home? You might want to stay in the home as long as possible not paying a mortgage.Especially if you were in the property for zero down or low down of 5 to 10%. It's a business decision.

          This also apply's to anyone that does not want to stay long term. They are helping people to make a decision between paying the morgage or paying off the credit cards and letting the home go!

          In today's market place foreclosure is NOT the stigma it was two years ago! A better credit rating with credit card debt is the alternative to a foreclosure on one's credit report. It's a choice.

          That's what this country is all about "options." - Paul 11:25:37 09/28/08 (9)
          • I have to say I'm disappointed. Excuses and moralizing do not excuse stealing, even from a bank.

            Did they borrow the money? Yes. And if the properties had appreciated would they be walking away? Ah, no.

            If I borrow money for an investment or new business and it doesn't work out the way I want I have a right to cancell out my repayment or try to modify it even though I can repay? Not a chance. However, if you think so, Paul, I was wondering if I could get a $50,000 business loan from you personally :>) I promise to pay it back...

            That this company offers options, fine. (Most of what they talk about is available for free but that's another story.)

            But this country is not about any and all options. It's about responsible options.

            I guess I am simplistic but to me stealing is stealing. One can play with contract language and i's and t's to try and get out of his/her financial responsibilties. But based on the fact that the person was just fine getting the money in the first place... We'll just add the word "cheat" to "thief".

            Sorry but I feel great sympathy for the average person in foreclosure. But seeing that pipeline being clogged by the irresponsible who think that they have a right to cheat their lender just because the markets aren't kind right now. Well, they are a part of the $700 Billion bailout that I don't want to pay for, or have my children pay for.

            And they thought the 80's were the "Me Generation". Welcome to the "Me only and screw everyone else Generation".

            Luckily most of the people I have come in contact with are ethical, moral and pay their debts. Even when it is hard for them to do so. - steele in minnesota 15:11:14 09/28/08 (8)
            • Steele, I'm SHOCKED!!!!!!!!!!

              What harsh language form a guy that understands the system, yet really doesn't understand it at all!

              You deal with contracts every single day! Default language is in every single contract!!!!

              Show me where it says I have to pay regardless of my ability to pay???? It doesn't!!!!!

              The contract says if I don't pay I'm in default and this is what will happen!!! OK they didn't pay the banks get the homes!!! What's the problem??? The bank isn't happy because they have too many properties???

              What, they don't want the homes???? AWE! Why not????

              That's just tough!!!

              Get off your higher than thou horse and follow the rules of the game!

              It was certainly OK fo bankers to devise adjustable rate mortgages and offer no-down, low down to people with scores of 500. NINA loans (no income, no assets)
              Yes. I know the deal!!!! What could be crazier than that! Stated income, No docs! (Liar loans as known in the industry)

              Start people off with a 6% loan with margins of 3.5. Fixed for one or two years! While getting "KICK-BACKS" from the bank, excuse me "yield spread premiums" of 1 to 3 points! Translation, on a $300,000 loan $3,000 to $9,000 for closing the poor homeowner that didn't have a clue what was going on!!!!! Then raising rates 17 months in a row pushing the borrowers rate to 10 to 12%. Forcing them into foreclosure. No problem, the bank bundled the mortgages and sold them to investors GLOBALLY!!! Calling them mortgaed back securities.

              Sounds like Karma to me!!!!!!!!!!!!!

              Now that the educate borrower is realizing his/her investment (the home) is dropping in value, because too many investors are "walking away" from what they thought was gong to be easy money! Now the bankers and the DA want to call foul!!!!!

              That's not how the game is played!

              There's no stealing, except maybe the corporate exec's gettting millions from selling bogus paper to investors worldwide!!! I guess that's why the Fed's are investigating.

              Don't blame that $700 Billion on the those not paying!

              Blame it on those that thought they could leverage the market forever!!!! The bankers looking to make a fast buck off people that wanted to own a home!

              That $700 Billion is NOT even a drop in the bucket compared to all the defaults currently on the books and future defaults coming!!!!! HELLO!!

              At first Wall Street tried to blame it on the subprime homeowner. Now we know it was lack of regulations and Wall Street GREED!!!! On a global basis!!!!

              Many call this a Wall Street bail out!!!

              Not even close! It's the boy with his finger in the dike!!!! And he's getting tired!!!

              No Steele, this isn't about morals, or theft. Is about
              educated homeowners making a business decision. Lenders that thought they could play fast and lose with other people's money. A market based on hedge funds moving billions of dollars on a daily basis to make a few penny's per share and it all spells GREED!!!

              No, I don't feel bad. I understand the game that's being played. I know the rules. I'm just upset, I didn't sell 18 months ago as I had planned. I'm upset at no one but myself! I knew the deal and failed to take action on a timely basis!

              There is an out for all of us. But most won't take it, because they'll say that won't work! Isn't that the way it always is?

              It all comes down to the movement of money!

              Hopefully you'll see the other side of the coin. You can't make fast and lose rules and them complain because others are playing the game different than you expected them to play! - Paul 22:34:13 09/28/08 (7)
              • Since you pick and choose items out of context and then climb on a horse higher than I could ever get on I will let you have the last word.

                It must be the political year. Arguments are not debates or discussions. I'm tired of the former.

                Sorry but I'm not playing the game anymore. - steele in minnesota 06:19:55 09/29/08 (1)
                • Steele, it hurts when you realize that you are a part of the problem if you sold these loans and profited!

                  Youa aren't alone. - Paul 06:47:00 09/29/08 (0)
              • Paul,

                I'd argue that it's not really a "game that's being played" as you say. There are two facets, one is homeowners purchasing property for either a residence or investment, the second is the securitized investments or mortgages(trust deeds) that provide the funds to make those purchases.

                If you purchase a property, you typically contract with a lender and agree to make payments in exchange for them providing funds to allow you to complete your purchase. The lender doesn't require you to share in any possible appreciation of the property, but they do expect you make the payments even if the property doesn't appreciate.

                When a homeowner has an event in their life that creates a problem repaying thir loan, they should talk to the lender and attempt to minimize the impact and damage for both the lender and themselves. That's what adults do, realizing they have contractual obligations and doing their best to fulfill those obligations. Some people will eventually have to walk away from homes they own, but they certainly don't need to pay an outside party as part of the process.

                I'm not quite sure how the rest of your post comes together. Stated income loans were available and did lead to inflated values, but that doesn't have a lot to do with Yield Spread Premiums or Wall Street executive compensation or congressional "bailouts". There are some points where these issues do influence each other, but the points aren't very significant.

                If the discussion is based on walking away from a home where the home has lost value, it's probably more productive to stay focused on that aspect rather than possible justifications for walking away. - jim 01:02:08 09/29/08 (4)
                • The focus of the discussion was the morality of walking away even though you have the funds to pay.
                  It wasn't about those in foreclosure having a life event.

                  Steele suggested it is your obligation to pay if you have the funds. I say it isn't. It's a choice one makes. It appears some in the San Diego area where the median home is $540,000 are chosing to walk away. I don't have a problem with that. Why pay $4500 on a loan and a depreciating asset when you can now rent for $3,000?

                  Today Wachovia was taken over by Wells Fargo. Another example of how corporate GREED has cost all us big time.

                  Wachovia only recently purchased Golden West/World Savings the creator of the "Pick a Pay" loans. Those owner sold at the peak of the market! Because they knew what was coming down the road massive (foreclosures, (Parker Brothers MONOPOLY BIG TIME). They played the game well! They cashed out!

                  Casino's are filled with nothing but money games.
                  If you don't think Wall Street isn't one large CASINO and everything that has happened wasn't a game to the REAL players. You're in denial.

                  Not unlike ENRON, when they ran a scam on California.

                  Brokers were recorded laughing as energy prices went up. They were making money, they loved it!

                  Recently oil prices hit $147 a barrel. Gas prices soared over $4.00 a gallon. Yet recently oil has dropped under $100 a barrel yet gas prices have dropped only marginally. You don't think the "players" are playing the oil market game???

                  The feds recently "STOPPED" short selling! The short sellers push stock prices down in an effort to make a buck! It certainly is a MONEY game, that unfortunately many consumers have no clue about, nor how to play to pla, nor the fact that they are being played.

                  Purchase Robert. K.'s (Rich Dad, Poor Dad author)Cash Flow game. - Paul 06:41:47 09/29/08 (3)
                  • Life events come into play as part of the "morality" discussion. I kind of envision it as a three point scale, 1 being people who absolutely cannot afford to keep the home, 2 being people in default but might be able to keep the home, possibly requiring multiple jobs and sacrifice, with 3 being people capable of making regular monthly payments.

                    People in the 1 or 2 category don't really have any moral quandary, they just have to make it through as best they can. People in the 3 category can make a choice, which is honoring their contractual obligations, or not. You bring up the concept of "casino play". Is it possible to go to Las Vegas, or another gambling destination and place a bet, without using any of yor own money by saying "I'm only playing if I win. If I don't win, I'm just walking away".

                    Who gets hurt when someone does that with real estate? The remaining homeowners who will likely suffer reduced property values, stockholders in the lenders who become unprofitable, potential homeowners who now can't buy due to overly tight guidelines. It's not a game, there are real life impacts involved in these kinds of decisions.

                    Aside from any potential morality concepts, an awful lot of purchases from the last few years involved piggyback seconds. Those seconds don't just disappear in a foreclosure, they become unsecured debt. Any potential walk-away with enough income to pay their loan(s) might want to think about whether that second is going expend the resources to seek repayment.

                    BTW: I believe it was Citigroup that bought Wachovia - jim 13:20:42 09/29/08 (2)
                    • You're correct about Citigroup! The question is how can they afford to take over Wachovia???

                      In terms of Casino play vs. buying a home. You bet you can borrow money from you credit cards and place bets in Vegas all day long. You can play until your funds run out or you win big time!

                      How many bought homes with ZERO dollars down! MANY! It wasn't their money. The govenment also made 125% of value loans. Yes, they gave you money at close to fix the homes.

                      Many in CA. in regards to new homes divisions, they purchased only to catch the wave of future appreciation. Gone now!

                      The banks made the loans knowing they could bundle the loans and sell them on the secondary market. Everyone was in on the dal! It was all about the movement of money!

                      Why on earth should a Broker selling a loan to Bob with a FICO score of 720 earn $1500 on a $300,000 loan. Yet earn maybe $6,000 for the same loan to Carl who has a score of 600? With all things being equal, paper work the application etc? What's up with that???

                      Carl and Bob could be friends buying homes next to each other.

                      So where does morality start? At the coonception of the loan? Or after you've closed the deal? Should Banks and Brokers have the same moral standards?

                      The DOW closed down -777.68 as of this writing! What does that say???

                      The question is why can't some people afford the home? Was it their fault or the lenders fault! Were they sold something they didn't understand or were other factors involved circumstances? Is it possible lenders abandoned safe conservative lending practices in an effort to generate more revenue, propping up their stock and bottomline.

                      Go around and ask people if they ahve an adj mrtgage. Ask them do they know their Index, margin, rate. Most don't what you're talking about.

                      These products are so sophisticated many real estate agents don't under a start rate, margin, Index, etc.

                      This is far beyond people failing to pay. A few people failing to pay isn't pulling down the market and causing the collapse of the banks.

                      Take note. When ALT A loans, and Jumbo loans start to default as did subprime, what's going to happen then???

                      Its going to get interesting! - Paul 14:00:32 09/29/08 (1)
                      • Paul,

                        It's not really as complicated as you make it out to be.
                        Betting on red or black is fine if you have the resources to cover your potential losses. Contractual obligations requiring you to cover your losses kind of falls into a different category.

                        When we start to devolve into saying it's the lender's fault people can't afford their loans, then the conversation doesn't really remain productive.

                        The banking industry has always had issues, some people think it's too restrictive, others think it's way too loose. That's open to debate as long as informational resources are defined.

                        This board, however, isn't a forum for expanding on theories that don't have much basis in fact.

                        It ppears to me you'd like to explore the potential problems borrowers and the lending industry have seen over the last few years. That's fine, but this isn't really the place for discussion of those kind of theories.

                        We're here to discuss foreclosure, and it's implications on people, not conspiracy theory. - jim 23:33:00 09/29/08 (0)