What is an REO Property and How to Find One

When looking for a real estate properties to invest in, investors can target a wide range of properties, from vacant properties to zombie properties, pre-foreclosures and more. 

Did you know there is one type of distressed property that is not only vacant, but there aren’t liens or claims on the home? Even more, you can also get a below market deal. 

It's true!

We’re talking about Real Estate Owned Properties, or REOs.

REOs come with a tremendous share of advantages — if you know how to find this type of property through real estate lead generation. 

In this article, we’ll break down the intricacies of an REO property, along with how to find this type of property in your local community. 

Let’s get started! 

What is an REO Property?

REO properties, short for Real Estate Owned properties, are properties that have been foreclosed upon by a bank or lender — and are now owned by them. 

When a property goes into foreclosure, the bank or lender attempts to sell it at auction to recover their investment. 

However, if the property does not sell, it becomes an REO property.

REO properties can be residential or commercial, and they offer unique and advantageous opportunities for real estate investors and homebuyers alike. 

These properties are often sold at a lower price compared to other properties in the market, making them attractive to real estate investors looking for a good deal. 

Additionally, REO properties are typically vacant, which means buyers can move in quickly without having to deal with tenants or previous owners.

Next, we’ll further explore the advantages and disadvantages of investing in REO properties.

Advantages of Investing in REO Properties

The biggest advantage of an REO property?

The chance for a great deal. 

Because banks and lenders want to get these properties off their hands quickly, they often price them below market value. 

This means that you as a real estate investor have the opportunity to purchase a property at a discounted price — increasing your chances of making a large profit.

Along with this, REO properties are usually vacant. So, if you are in need of instant cash flow, you can rent them out. Or, if you’re looking to do a fix and flip, you have the flexibility to start immediately without having to move current tenants out. 

That’s not all. Because the property is bank owned, there are typically no outstanding taxes — the property is free from claims such as tax liens, which saves investors from having to pay hidden and unwanted fees to own the property.

Disadvantages of REO Properties 

That being said, REO properties do come with disadvantages. 

One common challenge is the overall condition of the property. Since REO properties are commonly sold as-is, there may be significant repairs and renovations required. This can lead to cost overruns if your initial assessment does not find all the needed repairs. At the end of the day, this can eat into your original profit. 

Another challenge is competition. Since these properties are often priced below market value, they can attract a significant number of investors and homebuyers. This increased competition can make it more challenging to secure a property, especially in desirable and up and coming locations.

4 Ways to Find and Buy REO Properties

If you’re interested in investing in an REO property, here's how can you find one?

Find An Agent

Some real estate agents specifically specifically with REO properties. By working with one, you’ll have access to the many REO properties in your area. 

Bank’s Website

Banks will often list the homes they own for sale on their own website. 

Drive the Neighborhood

If there is an up and coming area of town that you are interested in investing in, drive the neighborhood and keep an eye out for a distressed property. If you find one, take the property information down and do a search online. There’s a chance it’s a bank-owned property. 

Propwire

The most efficient way to find an REO property is to use Propwire. By using Propwire’s “lead types” free search feature, you can discover REO properties in your local community or neighborhood with just the click of a button. 

REO Property FAQs

Q. Are foreclosures and REO properties the same?

While foreclosures and bank owned properties have similarities, they are different. When a buyer can’t be found for a property in foreclosure, the lender then repossesses it and sells it as an REO property.

Q. How do you Buy REO Properties?

An REO property can be bought through banks directly, real estate auctions, or through a real estate agent

Q. Is REO a good investment?

Because REO properties are vacant and priced to sell quickly, they can be very good deals for real estate investors.  

The Bottom Line: REOs

Bank owned properties, or REOs, come with their fair share of advantages. For real estate investors looking to diversify their investing portfolio, they can make for fantastic investment opportunities. That is, if you’re able to acquire one from the large competition. 

Use Propwire to find your next REO property, and be sure to make a solid offer to ensure that you obtain the rights to the property — and the return on investment in the future. 

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