Foreclosures, REO and Short Sales
Foreclosure is where a lender, generally due to non-payment of a mortgage, obtains a court order to sell off a property to pay any loans
secured on it, as well as their legal costs. Properties that are being held buy the bank are called REO (Real Estate Owned). These properties
are then auctioned off or sold through standard real estate channels.
Bank owned properties can be a really good source of below market value houses. Chances are they will need some rehab work, to get them
back up to a rentable condition ($5000-$15000), but the discount investors can get (50% cheaper or better), more than pays for any rehab work.
Then in a few years or sooner, depending on the market and your holding preference, you can either refinance or sell the property and realise
your profit.
A short sale is when the proceeds from the sale of the property fall short of the loans secured on it. Sometimes a lender, who has an owner that
can't pay the mortgage, will take a loss just to get the property off their books. This saves them having to sell it off themselves.
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Please Note - The information contained in this section is only my opinion and should not be regarded as legal or tax advice