How Can I Buy a Bank-Owned Property?

If you’re wondering, “How Can I Buy a Bank-Owned Property?” you’ve come to the right place.

First, we’ll start with a basic definition and overview before showing you, step-by-step, how to go about buying a property that the bank owns. Typically, these properties are listed as “REOs.”

What Does “REO” Even Mean?

REO stands for “real estate owned,” which, in itself, isn’t a great definition. 

It essentially means that the bank owns that particular property, and now they’ve hired a realtor (or a team of realtors) to show the property to prospective buyers. If you see the term “REO” on the house, then, just think “bank-owned.”

Typically, this is because the house failed to sell at auction after the property was foreclosed upon. That could’ve happened for many reasons: the market was in freefall, there was some mix-up about when the auction was being held, or there just wasn’t enough interest.

The most popular reason, though, is that the house requires serious repairs. In some cases, these repairs are so costly that people who didn’t want to buy the house at auction completely overlooked the property.

However, that doesn’t mean REO properties are bad investments. If you’re willing to put some elbow grease into it, buying an REO property in the right area can bring in quite a bit of money.

How Can I Buy a Bank-Owned Property?

With that said, how exactly do you go about buying a bank-owned property?

REOs are sometimes listed on RealtyStore.com, by customizing your search. For Bank-Owned & REO Homes for Sale.

Buying REO Properties: Other Important Points

Get Pre-Approved for a Mortgage

Banks don’t want to hold on to a lot of properties for a long time because the longer they hold on to properties, the more taxes they accrue. They also end up spending less time on what makes them the most money: lending.

So, since the bank wants to sell the property as quickly as possible, you should make sure that you can get pre-approved for a mortgage. 

After you’ve found some REO listings using either the HUD database, you can establish a range of mortgages that you’ll need to be approved for. Then, visit some banks in the area to see if you can take on that mortgage.

Work with REO Realtors

Additionally, you’ll want to work with a realtor who has experience in REOs. Most of the time, this isn’t a typical, ready-to-move-in single family home. If you listen to someone who doesn’t know what they’re talking about, REOs can cause quite the headache.

Search for realtors in your area who specifically use the term “REO” in their profiles, or even the phrase, “Specializes in REOs.”

Conclusion: How Can I Buy a Bank-Owned Property?

To buy a bank-owned home, you should first have a basic understanding of what you’re getting into.

“REO” stands for “real estate owned.” Essentially, that means the bank owns the property -- and, nine times out of ten, that property needs repairs.

Next, you need to find some REO properties. Use HUD’s database to search for REO properties or filter for “REO” properties using a customized search on RealtyStore.com. You can also use several other government databases to search for REOs.

After that, once you’ve found a range of properties that you’re interested in, make sure to get pre-approved for a mortgage within your price range. The bank wants to move quickly, and if you’re able to close soon, that sweetens the deal.

Finally, make sure to work with a realtor in your area who specializes in REOs. A good realtor who specializes in REO or bank-owned properties can help you avoid unnecessary headaches.