How Does a Bank Acquire REO’s?
As you know, a home is foreclosed on when the owner of the home does not make the scheduled payments. Subsequently, the bank will arrange for and carry out a public auction–usually at the county courthouse. But sometimes, the owner owes more to the lender than the market value of the property itself. This is often a barrier to selling the property at the auction. When no one bids on the property–or no one bids high enough–title reverts back to the bank. The property then becomes an REO, a liability the bank is eager to dispose of in a hurry. This is where you can benefit in real estate investing. Loan Types Make a Difference You may be surprised to learn that the type of loan used to purchase the home can make a big difference. It is best to purchase REO’s that had a conventional loan, as these will likely yield much better deals than those that used FHA and VA loans. This is because the federal government backs FHA and VA loans, and if the government so desires, it can actually buy
