Photo credits to homesloansandrealestate.com

Bank-owned properties, or REOs (Real Estate Owned), are properties that go back to the mortgage company after a foreclosure auction has been unsuccessful. In actuality, there is a small percentage of success in foreclosure auctions because the property’s value is significantly surpassed by what is owed to the bank. Thus, for every unsuccessful foreclosure auction, the property becomes owned by the bank and it becomes labeled as an REO property.

As soon as the ownership goes to the bank, it will now have the power to evict the residents of the house. The mortgage loan will now be wiped off and the bank has the right to make repairs, if necessary. The bank will also be the one to negotiate with the IRS to remove tax liens, as well as pay off any dues from the homeowner’s association.

If you are planning to purchase an REO property, you will be receiving an insurance policy for the title, as well as the opportunity to investigate the property. Before deciding to purchase a bank-owned property, consider very carefully if you are getting a good bargain. Double-check if the price you are paying can be compared to the other houses in that neighborhood. Also consider renovation costs and most importantly, do not allow yourself to be caught in a bidding game that will make you pay more than the property’s market value.

Always keep in mind that foreclosures are not always bargains. This is because every bank or lender have the same goal, and that is to get the best possible price for a property. Most of the time, if not all, these companies do not have any interest in selling cheap real estate.