Kentucky Bank Owned Poperties

Lake Cumberland, Somerset and Pulaski County

 What is an REO?

REO is an acronym for real estate owned and is industry jargon for foreclosure property repossessed by banks or lenders. If a lender or bank is the highest bidder a foreclosure auction — or if no third party bids at the auction — the property reverts back to the lender and becomes an REO. REOs are owned by banks. Lenders go to great lengths to sell REOs. For banks, however, bank-owned homes are a liability.

Thanks to a sharp rise in foreclosure filings nationwide, homebuyers and real estate investors are increasingly likely to encounter bank-owned properties that are for sale at real estate auctions. The increased presence of lender-owned homes in the market — known in the banking industry as REOs, for "real estate owned" — is fallout from the recent real estate boom that marked the first half of this decade.

Real estate auctions are gaining in popularity nationwide because they are a quick and efficient way to sell and buy property. According to the National Auctioneers Association, the fastest growing sector of the $257.2 billion auction industry is residential real estate auctions, which jumped 12.5 percent in 2006, generating $16 billion in sales.

Consumers eager to take advantage of the softening real estate market can now find significantly discounted real estate that has been foreclosed by lenders and is being auctioned to the highest bidder. When banks take back foreclosed-upon homes, they sometimes hire auction houses to unload properties. Banks are increasingly selling foreclosed properties at auctions to reduce the growing inventory of REO properties. That scenario has become more common as the number of owners with little or no equity — or even negative equity — has grown, particularly in cases of pricier homes with recent mortgages.

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Buying a bank-owned foreclosure at an auction, however, is not without hurdles.

Bidders must be registered prior to the auction with the company conducting the auction. Generally, winning bidders must immediately give the auctioneer a deposit, payable in cash or cashier's check only. Deposits are typically between 5 and 10 percent of the outstanding loan amount and the winning bidder must be able to close in cash within 30 days. The deposit amount varies from state to state and the auction company handling the sale. In fact, some states require winning bidders to pay the full sales amount the same day as the auction.

There are other hurdles too. All properties are sold "as is" and prospective buyers should inspect the homes prior to the auction, so they know what they are bidding on. Moreover, an owner or tenant living in the house may or may not be cooperative about moving out.

Lenders use auction companies because they move inventory quickly. But bank-owned foreclosures aren't the only type of property on the auction block. Sometimes homes are sold at HUD auctions, IRS auctions, "repo" auctions or sheriff's auctions.

How can I buy a bank-owned Property

Anyone can buy a bank-owned REO. The challenge for real estate investors is to reach the person who can make the decision to sell the bank-owned REO property. Each lending institution has different rules and requirements on how they sell bank-owned REO properties. Contact the lender and find out what they require to purchase an REO property.
 

Why should I buy a buy bank-owned Property

One of the primary advantages of buying a bank-owned REO property is that investors are purchasing a property without liens or other encumbrances. Before lenders make REO properties available for sale, they typically expunge all liens or claims against the property. Any cloud on the title — a second or third mortgage, mechanics liens, taxes or any other liens attached by creditors — are wiped out. Moreover, skilled investors can negotiate with the lender's loss mitigation department to discount the price to a fraction of its market value. Besides negotiating price, many buyers of REO properties also negotiate favorable lending terms below existing market rates.
 

What are the advantages of buying bank-owned properties or REO homes?

For real estate investors and homebuyers, bank-owned properties and REOs offer opportunities that are not available in the pre-foreclosure and auction phase of the foreclosure process. Buying bank-owned real estate offers the foreclosure buyer many advantages:

• Bank-owned properties are usually sold at below-market prices with great terms like low down payments and low interest rates.
   
• Buying bank-owned properties involves less risk and less competition.
   
• Foreclosures that are owned by banks are usually clear of any liens that may have been recorded against the property.
   
• Since the seller of REO homes is also the lender, you can negotiate with the bank to have them pay for all or some of the closing costs.
   
• Bank-owned properties are usually vacant because the banks have evicted the previous owner, saving the investor or homebuyer time, money and emotional toll involved in the eviction process.

The process of buying a foreclosure, REO, Bank owned or Short sale home can be a very stressful and tidieous transaction. Having a realtor who knows the ins and outs of this form of sale is essential to your home buying experience. Let me help to guide you through the process of buying your Foreclosure, short sale, Bank owned or REO Home, and together we will succeed!

Thank you, and I look forward to working with you and helping you find the home of your dreams!