Are you ready to purchase an REO or HUD home?


Before you sign those documents, you need to be prepared.

What is a HUD home?
A HUD home is a 1-to-4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.

What is a Bank owned Home or REO?

Real Estate owned or REO is a class of property owned by a lender typically a bank, government agency, or government loan insurer, after an unsuccessful sale at a foreclosure auction. There are many banks and agencies that list and take care of REO homes. 

What is the process of foreclosure?

As soon as a property goes into a distressed status (the borrower/home owner misses mortgage payments) the beneficiary will want to determine the amount of equity that the property has. Based on the amount of equity that is determined from the appraisal, the bank will decide whether to allow a short sale (if requested by the homeowner). If no short sale is requested by the home owner, the beneficiary will continue the foreclosure process. If the beneficiary is unable to sell the property through a short sale or at a foreclosure auction it will now become an REO property.

After a repossession from which the property becomes classified as REO, the beneficiary will go through the process of trying to sell the property on its own or obtain the service of an REO Asset Manager. The beneficiary will remove the liens and other debts on the home and try to resell it to the public, either through future auctions, direct marketing through a real estate broker, or by itself. The asset Manager may also try to contact REO realtors that specialize in certain zip codes to help sell this bank owned property. Real estate investors will often purchase these properties because of discounts offered to compensate for the condition of the property.

Many larger banks and government institutions have REO departments that field bids and offers, oversee upkeep, and handle sales. Most REO properties on the open market will be listed on the MLS by an assigned broker. 

Agents and Brokers work for the banks and asset managers in bringing is as high a price as possible. By working with a buyers agent, you are in a better position to get the lowest price that your looking for.