Buying bank owned homes, also known as REO’s, can be a great way to generate major wealth. There are definitely many real estate investors who have changed their lives this way. The result – bank owned homes are commonly perceived as being a good deal.
Banks and lenders are taking advantage of this perception. But it is not always really accurate. A lender will not happily take a loss just because they are stuck with a property. They will do everything possible to try to get back as much of their failed investment as they can.
Many lenders label properties boldly as “bank owned properties.” This is in hopes that the buyers will see that and jump at the chance to buy the properties. And it often works. However, there is nothing to stop lenders from selling at market value or incorporating extra fees. Just seeing that a home is bank owned does not make it a deal.
You might not be getting a deal even if you buy these properties at auction. There are often multiple additional fees that you have to pay in addition to your bid. You might 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. You should watch out for properties that did not sell at auction. Properties that have been on the market for a long time are a good bet. These properties are likely to be draining lender resources. You will have better luck negotiating a deal on this type of property than one that still appears to represent potential profit to the lender.
With REO investing, you have the potential to make a mint if you know what you are doing. But be careful not to act impulsively. Make sure that any bank owned home is actually a good investment for you.
