What is an REO?
An R.E.O. essentially means ” Real Estate Owned” (usually by a bank or lending institution, but could be a private party) it is any property acquired by a lending agency, quite often a bank (such as Bank of America or Wells Fargo). Most properties that have gone into default are put up for sale at a Trustees auction and if the property fails to sell they will become bank-owned. The minimum bid at a foreclosure auction is often determined based on the amount of the outstanding loan amount plus late fees.
When the bank acquires a home or or any real property (such as land, commercial real estate or mobile home) through foreclosure (becoming an asset) it will go through the process of trying to often sell the property or rent it out. In an effort to make the property more interesting to buyers, the bank will try to make the property more sale-able by removing any liens and then making possible home improvements. Real estate investors are often drawn to foreclosed properties because they can buy them for a discount compared to the market values for similar non-foreclosed homes.
How to Buy a Foreclosure (REO) Property
Foreclosure listings in Lake Tahoe are fairly few and far between. When distressed listings become available they typically do not last. Investors are willing to pay cash for well-priced properties to turn a profit now that market conditions are improving. If a buyer needs to obtain financing for a REO purchase it is possible, and, most banks will lend on the same property they foreclosed on. Some buyers are concerned that a bank owned property transaction is far different from buying a conventional piece of real estate. When, in fact, buying a bank owned property (REO) can be different, but no so much that a buyer should be worried. Not all foreclosures are the same, but these basic rules will be helpful guidelines.
Most banks attempt sell their REO’s in a “as is” condition, without the benefit of doing any sellers repairs. But when negotiations start taking place you may be able to get repairs completed if they are preventing a buyer from obtaining financing (usually referred to as a “lending condition”). In terms of disclosures given to the buyer, most bank owned properties do not provide any information pertaining to the overall condition of the home- there are two reasons why: 1. The bank knows very little if anything about the property and 2. Banks are not required by law to disclose any information on a standard REO sale.
Currently this April 2012 the following inventory was available in the Lake Tahoe California MLS: REO-Short Sale Active Listings: Of the active listings, there are 22 properties listed as short sales, (1.64%) and 17 properties listed as REO sales, (1.39%). The total percentage of distressed properties listed for sale, (3%) is vastly different than the percentage of distressed properties sold on a year to date basis which is roughly 19% of sales.
In April 2012 the following inventory was available in the Lake Tahoe California MLS: REO-Short Sale Active Listings: Of the active listings, there are 104 properties listed as short sales, (13.1%) and 26 properties listed as REO sales, (3.3%). The total percentage of distressed properties listed for sale, (16.4%) is vastly different than the percentage of distressed properties sold on a year to date basis which is roughly 42% of sales.
Click on the links below for current REO/Foreclosure property Listings: