Real Estate-Owned Properties
REO is an acronym for Real Estate Owned, the term came from banks who ended up owning real estate they had issued promissory notes on through a foreclosure or Deed in Lieu of foreclosure. When a borrower defaults they have several options:
- cure the default
- Sell the home to another buyer and pay off the note
- give the property back to the bank through a deed in Lieu of foreclosure
- sell the house to another buyer without collecting enough to pay of the note (short sale)
- be subject to a foreclosure.
Lenders are not set up to handle REOs they are not good property managers, and purge their REO inventory on a regular basis
We acquire REO's in two ways: a direct purchase from another lender, or from a borrower who cant meet their financial obligations. Many times these properties will have a significant amount of deferred maintenance that needs to be addressed before we can convert it into an income-producing asset.
So whats the advantage here? REOs can provide an exceptional below-market value, creating an opportunity for high return on investment with multiple exit strategies.
REOs can provide exceptional below-market value to create an opportunity for high ROI with minimal risk.
To offer relief, we sometimes take properties back through a deed in lieu of foreclosure or through an actual foreclosure.