REO Foreclosure:Why Are They A Good Deal?

You may have heard the term reo foreclosure but weren’t quite sure how it was different from any other type of foreclosure.  Well  REO stands for Real Estate Owned, or to be even clearer,  real estate owned by the bank.
Normally when a buyer fails to pay the mortgage on their home their home goes to a foreclosure auction or foreclosure sale.  During this auction attendees have the opportunity to bid on various available properties.   In this process some homes are sold as a foreclosure to the highest bidder, however If the minimum bid is not met then this would be considered a failed foreclosure auction.  This failed auction then goes back to lender as an Reo Foreclosure.
Once the property comes back to the lender making a sale is of great importance.  Most lenders have departments setup specifically to handle the backlog of Reo Foreclosures.  For a lender, having an REO foreclosure on their books negatively impacts their balance sheets.   Banks are in the business to lend money not to take on bad debts.   They need this money to put into investments that generate income.   If an Reo is sitting on the banks books it’s not making any money.  In essence the longer a house sits on the the banks books the more money they have to put out.
Having  too many reo foreclosures listed on your books as bad debts causes bank shareholders to get worried that their funds are being mismanaged.  This can later cause problems if the shareholders decide to take action.  If a shareholder’s wealth is threatened by the inability of banks to clear its bad debts then they can become unhappy.  This unhappiness can cause them to make changes that will further affect every aspect of the banks operation.  As we’ve seen with the recent closing of several banks major banks in 2008.
I don’t won’t  to bog you down in the legalities of it all I’m just trying to get your to understand how this ends up benefiting you if you decide to purchase and Reo Foreclosure.  Basically it all boils down this: to prevent issues in the future the bank offers discounts on reo foreclosures  so that they can get these properties off their books.  To go a step further the longer these properties sit  on their books the bigger the discount the bank is willing to offer to get rid of it.  And what makes now a better time than any time to buy is the fact that lenders have millions of these properties sitting on their books right now that they are desperately trying to get rid of.
If you’re thinking about investing in property or purchasing your own home you can’t go wrong with buying an reo foreclosure.  You may just get a deal of a lifetime. Find the BEST Foreclosures on the web!