Why to Invest in REO Homes

REO means real estate owned by the bank; these properties are a great deal for investors, who are looking for lower priced properties.


Foreclosure and REO are two different terms. In foreclosure properties, the bank tried to sell the properties in an auction but didn’t find the prospective buyer. So, when the foreclosure property is not purchased then the bank becomes the owner of the foreclosed property. Now the bank is not interested in keeping the REO properties on their books.  So, this would make a great deal for investors. REO properties are a really good way to make money for investors; the bank does not earn any profit. If you are looking for properties to invest then it’s always better to invest and look for REO homes. REO is a great deal, because you can get a property at the lower rate than the market value.

Why investors invest in REO’s?

REO homes when compared to other forms of real estate investments, serve as a better option for investors to invest so they can own cheap property that would later generate money. Today, the number of REO’s has increased vividly in numbers which allows prospective investors to hand pick properties that meet their specific needs and investment purposes. These properties have become a lucrative business deal for real estate investors.

Why does the bank sell an REO at a low price?

Basically, a bank is a lending institution and is not set up to buy or sell properties. They provide loans to the people, but they are not equipped to buy and sell properties. The bank is not familiarized to deal with buying and selling properties. As this is not their regular course of action. It takes time for them to proceed. When an owner of the property is not able to pay the installments, bank forecloses the property. But, it becomes difficult for the bank to meet repair expenses or any other miscellaneous cost. First, the bank loses out the money over a bad-debt and then federal government penalizes them on each and every REO homes. As the bank is loosing so much money on REO, they decide to sell it quick and at low value.

REO homes are profitable investments, as buyer can own a lower priced property which can be sold at much higher price in the future. Before buying REO homes remember to do your due diligence and research the property well.

Original article by Yuvika P.

For more information or assistance on Foreclosures and REO homes, visit the Backyard Home Help Center.

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2 responses to this post.

  1. This is a good article. But, REO properties are not just for the investor. In Las Vegas, we are seeing REO homes that are move-in conditions and great for the owner-occupant. Many REO homes never go to auction. In fact, here in Las Vegas, we are seeing less homes going to auction.

    These homes are a good investment for the investor and the owner-occupant because, once the economy starts turning around, we will see these homes appreciate.

    I agree that you must do your due-diligence, but a good real estate agent will assist you with that.

    Terrie Haynes
    Sellstate NRES


    • Nice point! REO’s are GREAT for homebuyers who want to live in the home.

      Be sure to find a real estate agent who has done a number of REO transactions so that he/she can walk you through the process.


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