Buying bank owned homes, or REO’s, can be a source of serious wealth generation. You have probably heard of more than one real estate investor who has changed their life permanently by getting involved in the buying and selling of bank owned homes. As a result, there is a common perception that bank owned homes are a great deal.
This perception is sometimes taken advantage of by bankers and lenders. But often it is not actually accurate. You cannot count on a lender happily taking a loss on a property. They will do everything possible to try to get back as much of their failed investment as they can.
It is not unusual to see banks and lenders boldly label their properties “bank owned properties.” This is because they are hoping that buyers will jump at the chance to buy the properties. And it often works. However, banks can sell at market value or incorporate extra fees if they like. A bank owned home is not automatically a deal.
Even buying properties at auction does not mean you are getting a deal. While properties are generally auctioned off for what is owed, there can be many additional fees involved. You will likely have to also pay accrued interest, attorney’s fees and foreclosure costs. By the time you pay all this you might not have a deal at all.
You have to have done your homework to get a good deal on a bank owned home. Keep an eye on properties that did not sell at auction. Also, check for property that has been on the market for a long time. These properties are more likely to be draining the lender’s resources. You will have a better time with these properties than with those that still might be profitable for the lender.
If you know the rules, you have the potential to make a mint with REO investing. Do not hurry or act impulsively. Make sure that any bank owned home is actually a good investment for you.