Buying repo homes can potentially be the deal of a lifetime. Repo (or repossessed) homes are sometimes referred to as REO (real estate owned) homes. After the homeowner defaults on payments, if the property fails to sell at a foreclosure auction the property reverts to the lender.

• The Good. There are lots of benefits in buying repo homes. The title will be clear and you can be sure there are no hidden liens to worry about. You can also be confident that taxes will be up to date, and that any previous occupants have been evicted. Unlike buying at foreclosure auctions, you have the chance to inspect before you buy, and can go in at your own convenience. This makes the purchase process much less time-consuming.


• The Bad. One drawback about buying repo homes is that they aren't necessarily a great prospect as an investment. The lender will be under an obligation to the shareholders, auditors etc.of the bank to get the best possible price for the house, so it isn't necessarily going to be a terrific bargain or a prospect for a quick profit. Your best chance of getting a bargain is if you watch houses till they have been on the market for 30 days or more. The banks may then be more willing to drop their prices as the house will be costing them money to maintain. Of course, these probably won't be the most attractive houses.


• The Ugly. Probably the biggest problem about buying repo homes is uncertainty about the condition of the house. Banks vary enormously in the way they handle properties. Some will spend money on making them more saleable (which of course puts the price up), but the majority won't. Either way, you are buying the house "as is" - the work is determined and cannot be changed. So although you do have the right to inspect the house before making your offer, you cannot use any problems you may find as an argument for reducing the price. You do have the right to withdraw if you find something really wrong - provided you do so within your contracted time frame. Make sure you find out in advance what this is, as if you get it wrong, that's it. In fact, you are much better going for a house that has NOT been repaired by the bank, as the work done by the banks is often "cheap and nasty" and the corresponding price increase is out of proportion. If you buy an unimproved house at a cheaper rate, you then have control over the quality of the repairs.

Foreclosure can happen to anyone, not just the poor. So whatever kind of house you are looking for, you can probably find one to suit you. Just remember the three vital rules about buying repo homes: (1) Investigate (2) Investigate, and (3) Investigate.

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