Wondering what all the talk about REO is? Jeff Adams helps you acquaint yourself better with REO properties.
What is an REO?
An REO is a real estate owned property usually owned by the government or bank. If a borrower defaults repayment of a loan, the lender may have the right to auction the asset that was used as collateral against the loan. This process is called a ‘foreclosure’.
However, at times, the auction may turn out to be unsuccessful. For instance, there may be no interested bidders. The auction usually begins with an amount that is equal to the debt. However, if this amount is more that the market value of the asset, it may not find bidders. In such cases, the lender lays claim on the asset which gets listed as an REO or a non-performing asset.
Why Invest in an REO?
One of the most trusted names in real estate, Jeff Adams, believes that investing in REO properties is an extremely wise option considering the prevailing market scenario. These properties are a good buying option since they have already been foreclosed and the owner, more often than not, wants to sell it off as soon as possible. A foreclosed property implies tied up capital rather than a gained asset. Financial institutions like banks want to free this capital and use it in the form of other loans. Hence, the chances of negotiation are better and brighter.
Tips to Remember
Jeff Adams is a front runner when it comes to understanding REO properties and cracking good deals. The following are some tips that he suggests keeping in mind before you make up your mind about buying that REO home:
Insurance: You need to make sure you are covered sufficiently before investing.
Check permits: Contact the municipality and check if all the permits of the property under consideration are in place.
Transfer of title and tax information: Make sure to complete all the formalities that are required to transfer the utilities to your name. It is also essential to get in touch with the tax department and have all the information transferred.
Eviction: If there are tenants involved, be sure to have all the eviction plans and procedures in place. Tenants need to be dealt with empathetically. Your eviction procedure must be legal and peaceful.
Safety: Address all the security, safety and maintenance measures pertaining to the property at the earliest. Electrical concerns are priority followed by structural and hygiene issues.
Knowledge: Educate yourself with the state law to understand the rights of redemption and real estate investing.
Paperwork: It is important to bear in mind that the property does not belong to you until the entire payment is made and all the necessary documentation has been completed. Seek constant advice from your attorney to make sure the paperwork is flawless in order to avoid any legal complication in future.
An REO property could turn out to be a pocket-friendly option. However, it should not be a hasty decision. Make sure to consult the right people and seek appropriate legal assistance before you take the leap.