Real Estate Owned is the full name for what we call REO. These are properties that the Lender/Bank has actually taken back from the owner. The homeowner has moved out and it’s the responsibility of the Bank to sell these properties. The real estate community is seeing more and more of these as the short sales become REO. Sometimes it’s a lot easier to deal with the bank than the homeowner trying to get out of the debt on their home through a short sale.
Here’s the rub. Banks need to keep these properties up. When a house is not occupied, itgets run down. The first thing to go is the landscaping. I’m not really talking about that. I’m talking about water damage, critters making it their home. Homeless people using the house to get out of the elements. That sort of thing.
Most of the time, the new buyer is look for a home that they can fix up, but not have to replace walls, framing and foundation. The other thing is the new lender wants to make sure that they are lending on a home that is habitable. Especially in this lending environment where lenders are making sure they fund investment quality loans.
If you are buying a REO make sure your lender is comfortable with the appraisal and the appraiser does not note that the house has major problems. The lender may not lend on the property. Since most of the Bank owned properties are purchased as-is, I ouwld also suggest a full home inspection as well as any other inspections that are needed. Be careful, you want to make sure you know what you are buying for you money.
Most of the bank owned properties in Contra Costa County are in East County. However, there are a fair amount of them scatter all over the county. It is a good idea to put these into the mix, however I think you’ll find that a motivated seller in this market will provide you with a good deal on a home too.