Why purchase an REO’s after foreclosure is complete?

Buying of properties that have been through the foreclosure process can occur in two different ways. First, the properties can be sold at the foreclosure auction with the buyer being someone other than the original lender. Another reason was, if there are no bidders at the auction, the lender will get the home back as the high bidder for $100 over the amount of the final judgment in the court action.

If one purchases the property at an auction he/she will be buying a property that may have major deficiencies with its title, structural issues, property taxes due, illegal structures on the property, un-permitted work, or other issues that can cause the bidder to be sorry later he bought the home. If you intend to bid on a foreclosure property at auction, I suggest you try and see inside the property before the sale

This does not mean that breaking and entering is the answer, but it is by contacting the homeowner and asking to buy the property from him, would be a better alternative. If he has moved away, try getting permission from the homeowner if you can track him down and go inside with some type of permission letter in your pocket in case the police are called.

One may also do their homework in the public records or get an attorney to do it for you. In fact, an attorney can do a complete and through title search in a matter of minutes or days. He may also do an open permit and code violation search in about a week depending on the local city or county’s code enforcement department.

Other cities will let you pay or make you wait for more than a month. While this is already in the process, he should do a personal home inspection, if he has a permit to physically check the property, if no permits just ask him to check on the external structure of the house, see if he can notice any faults with the building structure.

Another way to purchase a home that has been through foreclosure is to buy an REO. An REO is a “Real Estate Owned” property that has been through the foreclosure process, and has been purchased at the foreclosure auction by the lender. Most of the time the lender is forced to take a property to the auction to eliminate or eradicate liens or taxis against the property, otherwise the lender would have to assume the responsibility off paying of these junior liens if the homeowner gave the lender a “Deed in Lieu of Foreclosure” and walked away.

The difference in the lender getting the REO and reselling it is that the lender must bring any delinquent property taxes current for the buyer. The lender must also provide “fee simple” or “free-and-clear” title to the buyer. The process of clearing title deficiencies can be very expensive and a long process , so buying REO’s eliminates these related issues.

Based on instances and facts presented, it is much better in purchasing an REO property rather than purchasing a foreclose property in an auction. Buying property in auctions would cause you more than what you have expected , but if you think that auction property is much cheaper the, just do physical inspection of the home that you are going to purchase.