how a property gains reo status
so how does a property become real estate owned there is a process that lenders must adhere to for it to go from the original owner to lender owned it starts with the borrower defaulting on their mortgage or home loan lenders normally have a cut off date generally within a few months when a mortgage is in default lenders try to work with the borrower to bring it up to date if not it goes to the next stage foreclosure foreclosure is a legal process it allows lenders to repossess the property and try to sell it to recoup the outstanding balance of the loan there are instances when lenders can t sell the property this is the point at which it becomes real estate owned the lender manages the property and prepares it for listing on the market to help ensure a smooth closing buyers should also search public records to ensure that all liens associated with a property have been paid advantages and disadvantages of a reo propertyreo properties can be attractive to real estate investors and homebuyers because they re cost effective investments banks may often sell them at a discount to their market value since selling such properties is not typically their primary business line many properties that come through the foreclosure process don t have only outstanding loans there also may be other defaulted payments on them this can include property tax payments and other debts the point of foreclosure is to remove any liens from the property and sell it purchasing an reo means they come lien free so there are no defective titles and no outstanding debts the majority of lenders don t want to hold onto reo properties keeping them on the market means they lose money as such they re usually more motivated to unload the reo property than a regular seller would their own home instead of doing the back and forth lenders may be more willing to negotiate which means buyers can often walk away paying a lower price than they otherwise would lenders typically sell reo properties on an as is basis this means they will not make any major repairs or renovations prior to selling these properties are often in disrepair so it s crucial to have a thorough home inspection and be prepared to make and pay for renovations that may be needed a highly neglected or damaged property may require extensive repairs and upgrades to make it habitable again the cost of repairs can often negate any savings buyers have on the actual purchase price although single family home occupants may be evicted prior to listing multi family homes may still be occupied by tenants this means buyers may end up becoming landlords even if they never intended to take on that role buyers will have to take precautions to ensure they are compliant with local and state landlord tenant laws by honoring existing leases discounted pricesno outstanding liens or debtslenders may be willing to negotiateproperties are sold as ishigh cost of repairsproperties may be tenanted