Buying bank owned properties...
There is a lot of interest in buying bank owned properties these days. A lot of information, some good and some bad,
is floating around about the subject. Often the information offered is for sale, with the promise that you can make a
lot of money with little effort once you know “the secret formula”. The fact is that there are no secrets, and to make
money does require effort.
What’s an REO?
REO stands for “Real Estate Owned”. These are properties that have gone through foreclosure and are now owned
by the bank or mortgage company. This is not the same as a property up for foreclosure auction. When buying a
property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees
accumulated during the foreclosure process. You must also be prepared to pay with cash in hand. And on top of all
that, you’ll receive the property 100% “as is”. That could include existing liens and even current occupants that need
to be evicted. A REO, by contrast, is a much “cleaner” and attractive transaction. The REO property did not find a
buyer during foreclosure auction. The bank now owns it. The bank will see to the removal of tax liens, evict
occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Do be
aware that REO’s may be exempt from normal disclosure requirements. In California, for example, banks are
exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any
defects they are aware of.
Is it a bargain?
It’s commonly assumed that any REO must be a bargain and an opportunity for easy money. This simply isn’t true.
You have to be very careful about buying a REO if your intent is to make money off of it. While it’s true that the bank
is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it. When
considering the value of a REO, you need to look closely at comparable sales in the neighborhood and be sure to
take into account the time and cost of any repairs or remodeling needed to prepare the house for resale. The
bargains with money making potential exist, and many people do very well buying foreclosures. But there are also
many REO’s that are not good buys and not likely to turn a profit.
Ready to make an offer?
Most banks have a REO department that you’ll work with in buying a REO property from them. Typically the REO
department will use a listing agent to get their REO properties listed on the local MLS. Before making your offer, you’
ll want to contact either the listing agent or REO department at the bank and find out as much as you can about what
they know about the condition of the property and what their process is for receiving offers. Since banks almost
always sell REO properties “as is”, you’ll want to be sure and include an inspection contingency in your offer that
gives you time to check for hidden damage and terminate the offer if you find it. As with making any offer on real
estate, you’ll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-
approval letter from a lender. After you’ve made your offer, you can expect the bank to make a counter offer. Then it
will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Realize, you’ll be
dealing with a process that probably involves multiple people at the bank, and they don’t work evenings or
weekends. It’s not unusual for the process of offers and counter offers to take days or even weeks.
There is a lot of interest in buying bank owned properties these days. A lot of information, some good and some bad,
is floating around about the subject. Often the information offered is for sale, with the promise that you can make a
lot of money with little effort once you know “the secret formula”. The fact is that there are no secrets, and to make
money does require effort.
What’s an REO?
REO stands for “Real Estate Owned”. These are properties that have gone through foreclosure and are now owned
by the bank or mortgage company. This is not the same as a property up for foreclosure auction. When buying a
property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees
accumulated during the foreclosure process. You must also be prepared to pay with cash in hand. And on top of all
that, you’ll receive the property 100% “as is”. That could include existing liens and even current occupants that need
to be evicted. A REO, by contrast, is a much “cleaner” and attractive transaction. The REO property did not find a
buyer during foreclosure auction. The bank now owns it. The bank will see to the removal of tax liens, evict
occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Do be
aware that REO’s may be exempt from normal disclosure requirements. In California, for example, banks are
exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any
defects they are aware of.
Is it a bargain?
It’s commonly assumed that any REO must be a bargain and an opportunity for easy money. This simply isn’t true.
You have to be very careful about buying a REO if your intent is to make money off of it. While it’s true that the bank
is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it. When
considering the value of a REO, you need to look closely at comparable sales in the neighborhood and be sure to
take into account the time and cost of any repairs or remodeling needed to prepare the house for resale. The
bargains with money making potential exist, and many people do very well buying foreclosures. But there are also
many REO’s that are not good buys and not likely to turn a profit.
Ready to make an offer?
Most banks have a REO department that you’ll work with in buying a REO property from them. Typically the REO
department will use a listing agent to get their REO properties listed on the local MLS. Before making your offer, you’
ll want to contact either the listing agent or REO department at the bank and find out as much as you can about what
they know about the condition of the property and what their process is for receiving offers. Since banks almost
always sell REO properties “as is”, you’ll want to be sure and include an inspection contingency in your offer that
gives you time to check for hidden damage and terminate the offer if you find it. As with making any offer on real
estate, you’ll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-
approval letter from a lender. After you’ve made your offer, you can expect the bank to make a counter offer. Then it
will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Realize, you’ll be
dealing with a process that probably involves multiple people at the bank, and they don’t work evenings or
weekends. It’s not unusual for the process of offers and counter offers to take days or even weeks.
| MobileHome REOs | |
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Bank serving South Eastern US, merged with Regions Financial Corp (Regions Bank) |
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currently, 125-150 bank owned properties listed nationwide, breakdown by state |
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13 commercial REO properties listed, nationwide & Puerto Rico |
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Reo Property in 23 states, mostly Eastern & Southern, Midwest, TX, & CO, updated bi-monthly |
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| Chase Bank | Nationwide REOs |
| CitiMortgage | Nationwide REOs |
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REO Properties in AL, AZ, CO, FL, NM, TX |
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Largest Nationwide Originator, 1000s of REO properties nationwide |
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325 listings in CA, 35 in AZ, a smattering in other states |
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Lots of REO property nationwide |
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very skimpy on REOs, nationwide |
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| Fidelity National Financial | (7 day free trial) then paid subscription only |
| First National Bank of Alaska | Bank owned property in AK only, residential, commercial & vacant land |
| First Preston | Not a bank itself, but a marketing company which sells REO property for HUD (lots in about 10 states) and some banks (100 or so nationwide) See HUD below more complete coverage of all HUD REOs for all states |
| Freddie Mac | Government - lots of REO inventory nationwide |
| Fremont Investment & Loan | Out of Business |
| GMAC (Now CAPMARK) | Commercial REO Properties - Nationwide (about 20 listed currently) |
| Government Home Sales | HUD & VA properties mostly |
| GRP Financial (Sallie Mae) | Government ** Nice overview map |
| HMBI | Markets & Manages HUD REO homes in 10 states (See also HUD below for other states) |
| Home Loan Bank | about 20 bank owned properties currently throughout CT, GA, IL, ME, MI, MN, NJ, NY, PA, TN, TX. |
| HSBC Bank (Residential) | Currently 83 bank owned homes listed nationwide |
| HSBC Bank (Commercial) | Currently 3 commercial REO properties |
| HUD | Government, also see First Preston (better search) not necessarily the same property listed on both |
| IndyMac Bank | currently about 500 bank owned property listings nationwide |
| Integrated Asset Services | |
| JP Morgan Chase Bank | nationwide REO property, (1000s listed) |
| Kennedy Funding | a handful of commercial REO properties |
| Kentucky Housing Corporation | 18 bank owned homes in KY only |
| Keystone Asset Management | |
| Lenders Asset Management | |
| Lexington Bank (LSB) | REO listings in NC (7 listings) |
| M&T Bank | 22 states mostly Eastern, Midwest, TX, (127 bank owned property listings currently) |
| Mortgage Lenders Network | |
| National Bank of Arizona | a handful of AZ bank owned homes |
| New South Federal Savings Bank | |
| Ocwen Financial | |
| Omni Bank | A few REOs in a few cities, FL,IL,AL,NC |
| People's Bank | Currently a few bank owned properties in CT |
| Premiere Asset Services | Wells Fargo Residential Bank owned properties |
| Private Financial Services | Bank of OK |
| Regions Bank | 16 States in South, Midwest and TX |
| REO Nationwide | |
| Security National | |
| Small Business Administration (SBA) | Currently a handful of nationwide REO listings |
| Texas State Bank | residential & commercial bank owned property (currently 12 listed) TX only |
| T.R.E.O | Marketing Company - You now need Login & Password to access |
| U.S. Department of Agriculture | |
| Unity Bank | NJ only |
| US Bank | Nationwide, with currently 257 bank owned properties in 27 states |
| Virginia Housing Development | |
| Virtual Bank | worthless, about 20 Reos, but no addresses or info |
| Wells Fargo Commercial | Commercial bank owned property (about 10) |
| Western Bank | Puerto Rico Bank Owned Property |
| Wilshire Credit Corp. | currently about 2400 bank owned listings nationwide |
| Zions Bank | Currently 10 commercial & residential REO properties (CO, IL, ID, UT) |
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