It is no secret that America is facing an unprecedented foreclosure crisis. But, what happens to all of those foreclosures if no one buys them at the auction? Well, the banks have to take back the properties, and they become Real Estate Owned, or REO. Contrary to popular notion, the banks do not want to take these properties back. These properties become non-performing assets for the bank, and hinder the bank’s borrowing and lending powers. Because these properties propose such a negative situation for the banks, they become very motivated to sell off these REO properties. Since the banks are motivated sellers, they are often willing to accept deeply discounted offers for REO properties. This presents an incredible opportunity for real estate investors to buy properties for prices far below market value.
It is often a good idea to focus on REO’s that have been back on the bank’s non-performing asset list for more than 90 days*. If you try to negotiate a discount with the bank before 90 days*, you could face more resistance from the bank. Also, there is a very small group of realtors in each area that are able to market REO listings. It is crucial to find out who these realtors are in your area, and contact them if you want to excel in purchasing REO properties.
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