Advantages & Challenges of an REO Process
Many homebuyers and especially investors express keen interest in the REO process. Some people invest only in properties that are in the REO process. Albeit there are many advantages to do so and here we will look at the benefits of REO process for a homebuyer or investor. But nothing comes only with advantages and there has to be a few challenges, shortcomings or drawbacks of anything. Thus we also look at a few challenges of the REO process, things that you would have to face and overcome.
Advantages Of REO Process
The first major benefit of an REO process is the value at which a property is available. It has been traditionally seen, for many decades, that properties that have not sold right at the time of foreclosures and short sales, which have entered the REO process and have stayed there for a while, are extremely cheap to buy. They are almost always sold at a much lesser price than what a normal property in the same area, of the same type would be sold at. This creates a perfect opportunity for any homebuyer or an investor.
The second benefit of the REO process is that because the bank or a lending company is in control of all the proceedings, things are much more systematic and quick. Banks would want to dispose of the property and sell it to someone which is why they would quicken any process. Furthermore, the REO process is professionally handled and you do not have to deal with short sale escrow or individual homeowners. This makes for an ideal environment for investors or new homebuyers.
The third benefit is that since homes in an REO process have remained unattended and the lending company or bank is only interested in making up the money it has lost due to a defaulting mortgage, it is often priced lower than what the property is truly worth of. Thence, investors get a property that is more valuable than what it is priced at. At a relatively lower investment, homebuyers can get a much more valuable property.
Challenges Of REO Process
The first major challenge of an REO process is that it would draw many investors. Although the initial bid price or ask price may be low, there is a possibility of it surging northward rapidly. Getting there first and quickly closing the deal is what one must try to do.
Secondly, the property may not be well maintained and there may be a need of repairs and some patchwork. If one is happy to do such minor touchups then the capitalizing on an REO process can be very lucrative.