REO's just leftovers that no investors wanted?

[Brian Garrett]

Since REO's are bank owned and have already gone through the foreclosure and auction process does that mean they are a less desired investment property? I would think that all of the seasoned and experienced investors who buy their properties via auction or at the courthouse steps would have picked the property up during the foreclosure process if it really had good opportunity. Especially in a competitive market where there are tons of investors looking for deals every day. What are some example instances where a property would go through the foreclosure and auction process and make it to the REO stage but still have potential to be a great investment opportunity? Was the property just overlooked? Perhaps listed incorrectly? Went under the radar?

[Christopher Phillips]

Brian G.

50% of auctions fail. It has nothing to do with investors passing over the house.

When a house goes through auction, the lender is trying to recoup the money owed on the property. If that amount is excessively high, they aren't going to get the price and then they are forced to buy back the house.

Auctions usually have a reserve price that can often be higher than the house is worth due to the owner over borrowing or being caught short in a falling market.

And in a typical auction, the house is still occupied and with multiple liens attached. That combination makes the house too expensive for the market.

Once the bank buys it back at auction, they will be responsible for removing the occupants and settling the liens before listing it on the market as an REO.