Foreclosure Vs. REO What is the Difference
With Foreclosures hitting record limits this year Investors are coming out to get deals and it is a great time to get them. But When you look for foreclosures you see some advertising Foreclosures and some advertising REO’s or Bank Owned properties and some advertising Pre-foreclosures.
Let’s clear up the confusion. Foreclosure is a process - When an owner of a home that has a loan on the home fails to make their payments the Bank Forecloses on the home to take ownership of the home. This process takes different time in in different states but generally the home owner is 3 to 6 months behind on their mortgage when the bank will begin the Foreclosure process.
When the Bank issues a NOD or Notice of Default - this is a public notice that the bank is beginning the Foreclosure process. At this point the Home is in Pre- Foreclosure and the Home can sell the home to a buyer or investor and clear their debt with the bank and avoid the Foreclosure all together.
Depending on the the state the Home remains in Pre-foreclosure anywhere from 30 days to 6 months. After that time the Bank must auction the home and give public notice of the auction. The home owner can make the back payment and retain the home right up until the home is Auctioned. Once the Auction begins Investors/ Buyers can bid on the home and the highest bidder wins the home based on Bank Approval. The Auctions are rarely absolute auctions and the bank must approve of the final sales price to agree to the deal.
If the home is not sold at the Auction the Bank takes over the home and then usually sells it through an affiliated Real Estate Company. This is what is called Real Estate Owned or (REO)
So if you are a buyer looking for a home that is discounted and you want to deal with a Bank you would ask your agent to look for REO properties not Foreclosures.
Banks do offer deals on REO’s from time to time and if you work with an agent that deals with REO properties they will be able to notify you when those opportunities are available.
you can also visit Real Estate Investing for Life at http://www.realestateinvestingforlife.com to sign up now for property investment opportunities. Donald Griffith is a Speaker / Author / Real Investing Coach
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