REO property refers to real estate that was repossessed by banks. REO is the acronym for Real Estate Ownership; which means that the bank has title to the property. Bank-owned real estate includes all types of property, including residential homes, vacant land, and commercial buildings.
When a person buys REO property from banks, they follow the same procedure as if they bought from a private seller. The only variation is that purchase offers are sent to the bank’s real estate agent or loss mitigation division.
Buying bank-owned real estate can be a good option for first-time homebuyers, second-home buyers, and real estate investors. Although REO homes are generally offered at discounted prices, most are in need of some level of restoration.
REO homes often sit empty for long periods of time. It is not uncommon for these homes to have broken windows, ripped carpets, missing appliances, toilets, and bathtubs. That said, there are also plenty of high-quality homes owned by mortgage lenders.
Banks are not discriminatory when it comes to foreclosures. As sad as it is to see homes vacant and homeowners displaced, the foreclosure crisis has left a lot of affordable housing on the market. Some properties are listed at less than half of their original cost. However, exceptionally valuable properties can be difficult to locate because banks hold onto them in the hope of recouping financial losses when the market recovers.
Before exploring REO homes, it may be beneficial to research strategies to improve savings. One method of finding affordable housing is through Fannie Mae’s home loan programs. Another is the Neighborhood Stabilization Program (NSP) offered through HUD, which provides government grants to people who purchase qualified foreclosure properties.
Fannie Mae Homepath is a good option for people interested in residential housing. Buyers can apply for financing through Home Path Mortgage for reduced interest rates, down payments and closing costs.
An attractive aspect of purchasing financing through Home Path Mortgage is that buyers can get extra money for homes that need a light renovation. With conventional home loans, buyers have to take out construction loans to cover repair costs. These loans carry a higher interest rate that can add several thousand dollars to the total cost of the loan.
Homepath currently allows buyers to borrow up to 35 percent of the value of the renovated property or a maximum of $35,000. Renovation loans are available to real estate owners and investors.
One thing to keep in mind when submitting real estate purchase offers is that banks rarely accept offers for less than the asking price. Due to the fact that multiple buyers often bid on the same home, it’s a good idea to submit a high bid in advance. If the bank is not willing to accept the offer, there are many other houses on the market.
To get the best return on investment, you need to research available home purchase programs and understand the process of buying REO properties. One of the best strategies is to match Fannie Mae Homepath homes with NSP grants and obtain home mortgages with Home Path Mortgage. This method can produce substantial savings and significantly reduce the amount of monthly loan payments.