It’s no secret that the real estate sector has a volatile market. Prices could go up or down without notice, and any unprepared buyer may or may not suffer significant losses. For this reason, it’s also essential to do your research about the market.
If you’ve done your research, chances are you’ve come across various confusing terms. A perfect example of this is “REO” and “foreclosure”—two terms that often confuse new real estate inventors. You shouldn’t worry, though, because we’re here to help.
In this article, we’ll detail the difference between REO and foreclosures. Read on below to get started.
What Is a Foreclosure Property?
Foreclosure is a process that happens due to unavoidable circumstances. For example, a buyer may be having problems paying the mortgage. The lender might become aware of this and immediately give the buyer notice. The buyer will have 30 days to start paying the mortgage again, or the property will be foreclosed.
A property can also be foreclosed if the property owner fails to make the monthly mortgage payments for a certain number of months. If the owner doesn’t make the payment, the property can be foreclosed.
What Is an REO Property?
REO is short for “real estate owned.” An REO property is the result of a foreclosure. After a property is foreclosed, it goes into the REO stage. At this point, it is still the government’s responsibility (federal or local) to take care of the property.
The government must then take care of the property until a buyer purchases it. When the government auctions off its properties, they are sold at a below-market price. This makes it a favorable investment for any real estate investor.
The Difference Between the Two
In the context of foreclosure and REO, the main difference is the point of ownership. With the former, the ownership lies with the homeowner, while ownership is transferred to the government in the latter.
The other difference is the price. When you buy a property that has gone through foreclosure, you’ll get the property at a meager cost. However, the catch is you may have to deal with some maintenance issues.
On the other hand, the government will handle all maintenance issues. They’ll also do some renovations to the property before selling it. This means that you’ll get a property at a much lower cost than the market price. It’s worth noting that before you can buy an REO property, you must first be pre-approved by the government. They will only sell the property to buyers who can afford it.
Which Should You Buy?
Both REO and foreclosure properties can be a good investment. If you can find the right property at the right price, you’ll have a winner. But how will you know which one to get?
The best way to go is to check the market. There are many more foreclosures than REO properties. Because of this, you have a higher chance of finding a foreclosure property. However, you may even find an REO property for sale, which is arguably an even better deal.
It’s worth noting that an REO property is a good investment because of its price. The government will provide the property for less than it was initially sold. Because of this, you should do your research and find out where the property was originally sold.
If the property was purchased for $200,000 but is now selling for $100,000, you get a 50% discount. This is a significant discount and means that you can get a property at a much lower price than the market value.
Conclusion
If you’re planning to invest in real estate, you must understand the different types of properties available. You should also know about the differences between them. This way, you’ll be able to make the best investment decision.
If you’re looking for REO properties in Orange County, Orlando REO Professionals has got you covered! We have a wide range of properties available—all of which are affordable and of good quality. Simply contact us at (407) 247-8559 or via email at info@o-reo.net to get started!