Get it? The system is designed to prevent lenders from just swooping down and snatching away peoples homes. The waiting period gives the homeowner plenty of time to find the money to bring the payments current.

OK, now the home goes to sale. What if no one bids on the property at the sale? In that case the property is said to be "sold" to the foreclosing lender. In other words, the bank gets the home.

Now the property is held by the lender/bank in an account known as "real estate owned" or REO.  Does this make the bank happy? No! Banks don't like that because the property becomes another item on the lender's list of "non-performing assets".

If they have too many non-performing assets they get into trouble with banking regulators. As you can imagine, the bank really would like to sell that property as quickly as possible.

So you ask, "Can I buy the property from the bank at a substantial discount?" The answer is easy... Sometimes!  

There are times when banks have so many properties in their REO file they will listen to almost any offer that will get the property off of their books. During these periods they may even provide financing to the right investor.

However, most of the time banks want as close to fair market value as they can get for REO property. If you want to talk to a bank about their REO's you'll find that often it's not easy to contact the bank's department that handles REOs.

Ask the manager of your bank for some guidance. The officials in the REO departments usually hate to deal with inexperienced investors, but if you are ready to make cash offers you will get their attention and have a chance to make good deals.

Yes, there are times when your first foreclosure investment choice should be an REO if you have lots of cash. But most of the time pre-foreclosures produce far better profits.

* This series was written by an investor and not an attorney. Nothing here should be considered legal advice. If you have a question about any contract ask an attorney BEFORE SIGNING!

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Short Sales - A Guide for Foreclosure Investors


Because of all the foreclosures, banks are willing to discount the
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