Are you looking for low-cost property with a potentially high return on investment? Then you might want to consider buying REOs (real estate owned properties). Before we look at how to find REO properties, it is important to first understand what a real estate owned property is and why an investor should hunt for them.
What Is an REO Property?
A real estate owned property is one that has been repossessed by lenders from borrowers that have defaulted on their mortgage payments. REO property could be multi family homes, condos, townhouses, or single family homes.
Initially, the lender will try to recover their money through a public auction of the property. In case the home fails to sell at the foreclosure auction, the lender will then take ownership of the property. The home will then be listed under bank owned REO properties.
Related: What Is an REO Occupied Property? Should You Buy One?
Why Should You Invest in REO Properties?
Why invest in this type of property? What are the benefits of investing in bank REO investment properties?
- Discounted price – Lenders are often motivated to get rid of their REO properties. All they want to do is recover the portion of the mortgage that wasn’t repaid. They don’t really care about making a profit out of the sale. As a result, the price of REO properties is usually lower than the market value.
- No issues with outstanding taxes or liens – When purchasing regular property, you are likely to encounter unpaid mortgages or outstanding property taxes from the previous owner. With REO properties, however, banks clear all liens and property taxes to ensure a trouble-free transfer of ownership.
- High return on investment – Since REOs come with huge discounts, real estate investors have a high chance of making a good return on investment.
Related: Pros and Cons of Buying REO Property for Real Estate Investing
How to Find REO Properties for Sale: 8 Different Ways
Wondering where to find REO deals? Here are some of the best places to find REO properties for sale:
States and Cities with High Foreclosure Rates
If you want to find bank owned REO properties, first you might want to identify the areas where there is a high number of foreclosures. Remember, as a real estate investor, you aren’t limited by location. Long distance real estate investing is always an option. So explore markets where you have a better chance of finding the right REO property for you.
ATTOM Data Solutions’ most recent foreclosure report lists the following states and cities as the places with the highest rate of foreclosure:
States with the highest foreclosure rates
- Deleware
- South Carolina
- Maine
- New Mexico
- California
Cities with the highest foreclosure rates
- Trenton, NJ
- McAllen, TX
- Davenport, IA
- Dayton, OH
- Albuquerque, NM
- Louisville, KY
- Riverside, CA
- Baltimore, MD
- Cincinnati, OH
- St. Louis, MO
Start your search in any of these locations right now.
Bank REO Listings
Most banks offer free listings of REO properties for sale. You can either check a site like the Bank REO Real Estate blog or get in touch with the bank for inquiries. Banks that provide free listings include:
- Bank of America
- CitiMortgage
- HSBC
- First Citizens Bank
- Flagstar Bank
- Key Bank
- TCF Bank
- Republic Bank
However, with all the listings out there, the search process can be frustrating and lengthy.
Government Foreclosures
It is not only banks and financial institutions that can foreclose on a home. The IRS repossesses properties due to unpaid taxes. The Federal Housing Administration (FHA), the Department of Veteran Affairs (VA), and the U.S. Department of Housing (HUD) foreclose on borrowers who default on mortgage payments. Even the FBI and the Drug Enforcement Administration (DEA) are involved in foreclosure once in a while.
Here are some of the places where you can find government foreclosure lists:
Related: How to Find Foreclosures: The 9 Best Ways
Mashvisor Property Marketplace
Mashvisor is a very popular real estate investment site that comes with a wide range of tools for finding and analyzing REO properties. If you are looking for off market properties like REO homes, auctioned homes, short sales, and foreclosed homes, you can visit the Mashvisor Property Marketplace.
REO properties are just one kind of off market property you can find in the Mashvisor Property Marketplace.
You can use the following filters to find the exact kind of home you are looking for:
- Type of investment property
- Location
- Miles
- Budget
- Rental strategy
- Number of bathrooms/bedrooms
- Cap rate
- Cash on cash return
- Listing types (foreclosures, non-MLS, tenant occupied, or needs repairs)
You can also use the investment property calculator to analyze REO homes for sale based on expected rental property expenses, occupancy rate, cap rate, and cash flow.
Driving for Dollars
As the name suggests, this strategy involves getting into your car and driving around neighborhoods looking for distressed or abandoned properties. Driving for dollars is not only inexpensive but also helps you find homes that have not been listed anywhere. Since there is no competition, you are likely to get a very good deal. Signs to look out for include:
- Broken windows
- Unkempt yards
- Uncollected newspapers
- Clear code violations
- REO signs in the yard
When you find such a property, do some research to find out if the home is real estate owned. If it is, reach out to the lender and make an offer.
Real Estate Agents
Real estate agents can make your search for REO properties faster and less stressful. Licensed agents have access to the multiple listing service (MLS) where thousands of properties are listed. In addition, a well-connected agent is usually aware of unlisted properties in their area. You can find a real estate agent by searching online or asking for references.
Find a top-performing real estate agent here.
Online Real Estate Owned Directories
Online auction platforms and REO directories list a wide variety of REO properties for sale. In addition, you will find listings of homes that are facing imminent foreclosure. Sites to check out include:
- auction.com
- foreclosure.com
- realtybid.com
- hubzu.com
- bid4assets.com
- conciergeauctions.com
Public Records
This is another great way of how to find REO properties. Property records are kept at the city hall, county recorder, county courthouse, or some other city department. Members of the public are usually allowed to visit the offices and search for information on a home. You could also peruse federal court records to establish if a homeowner is involved in litigation or has signed for bankruptcy. Please note that you might have to pay a small fee to get copies of records from the county.
Conclusion
Using these strategies, anyone can learn how to find REO properties. Once you’ve found REO property that fits your criteria, be sure to conduct a professional home inspection. This will give you an idea of the required upgrades and repair work. You can then negotiate a fair price with the lender.