REO’s

What is an REO and how can I get one?


To better be able to appreciate this system it is important to understand, what an REO property is. REO is an acronym for real estate owned.

Real estate owned is a property that a lender has already foreclosed on and has now taken back into inventory.

It is suggested that real estate owned property is a wonderful investment because the lending institutions are more willing to sell them at a discounted price to simply get them off their inventory sheets.

I, however, have discovered that this is not entirely true. To better explain this, let me walk you through the five steps to conventional REO investing.

Step Number One: find properties to purchase. This is actually fairly easy and straightforward. Most lending institutions, including banks, maintain a list of REO properties and a simple phone call to the REO Department of that institution will produce the list.

Step Number Two: the second thing we have to understand about REO properties is that these properties will be sold as is. What this simply means is that the bank or lending institution or whoever is holding that property in inventory is going to do nothing to spruce it up.

Therefore, if we intend to purchase the property we also have to take into consideration any cosmetic additions or repairs that need to be made.

Step Number Three: This step is actually not very difficult for most, however; it needs to be addressed. Most lending institutions will require that you get pre-approved before they will sell you one of their REO properties. Basically what this means is that you have to go through a loan approval process just as if you were buying a normal house on the open market.

Step Number Four: Once the decision has been made to purchase a property, the initial cosmetic and repair calculations have been made and the initial qualification process has been completed, it is now time to get a full title search and professional inspection done.

Step Number Five: Once the first four steps have been completed. It is now time to move on to step five, which is to close the deal and began to work on exit strategies.