Buying REO homes can be an excellent and very profitable "way in" to real estate, especially for the novice.

REO, or real estate owned, properties are properties which the lenders have taken back into ownership after they failed to sell at foreclosure auction. The lenders, usually banks, will then try to sell the properties as quickly as possible.

If you are interested in the idea of buying REO homes, don't let the idea that they are foreclosed properties put you off. It doesn't necessarily mean that there is anything wrong with them - they can range from poor to perfect condition. It just means that the owners couldn't afford the repayments for all sorts of reasons.

There are a number of advantages in buying REO homes, especially for the first-time buyer.

• Buying REO homes is often seen as a very safe way to buy or invest in property, especially for the novice. There is no risk to the purchaser and you can be certain of the ownership, as the bank provides a good clear title.


• The bank usually wants to get rid of the house as quickly as possible, as it is seen as a liability. So it is in their interests to go for a quick sale. They don't necessarily want to sell it cheap, as they need to minimize their losses, but in the current buyers' market REO homes in many areas are going for up to 20 percent below market value.


• The bank will usually have covered all the taxes and liens, although banks do vary in their policies.


• If you are buying a house in the usual way, you and your appraiser usually have to consider the seller's convenience for entering the property for inspection. When the property is being sold by the bank, you can have immediate access at your own convenience. This makes the whole purchase process much faster.


• Because the banks want a quick sale, they will usually be open to negotiation over rehab costs, closing points, liens etc. They may also accept a lower down payment. You stand a better chance of being able to negotiate if the house has been on the market for 30 days or more.

However, you have to bear in mind that there are also some disadvantages to buying REO homes.

• Although there are no problems about being able to inspect the property, the bank will usually not agree to carry out any repairs and the property is sold "as is".


• The bank will usually require additional paperwork.


• You cannot obtain disclosures as to the history or condition of the property.


• Some people are worried about buying REO homes because of a fear that the previous owners may arrive and cause problems. This in fact very rarely happens and if it does, they have no legal rights and you can call the police. It is just the possibility that causes a worry for some buyers.

On the whole the advantages of buying REO homes outweigh the disadvantages, especially for the first-time buyer, or the investor for whom time is of the essence. Provided you are aware of the possible drawbacks and have a strategy for dealing with them, it can be a very good proposition.

If you would like to know how to find the best selection of REO homes and all other kinds of foreclosure properties, come and visit http://www.bizwrite.co.uk/realestate/foreclosures.html

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