Must Follow Do’s and Don’ts for REO Investing

When a borrower misses some payments for the loan drawn, the lender sends across a ‘Notice of Default’ demanding repayment to avoid legal action. Here begins the pre-foreclosure stage wherein the borrower gets a chance to repay the debt, sell off the property or figure out a solution with the lender by explaining his situation.

If the default continues, the lender lays claim over the property which is now termed as a ‘foreclosed property’. The property is auctioned beginning with an amount that covers the debt. If an auction fails i.e. if there are no interested buyers, the financial institution which loaned the amount (banks or governmental organizations) is entitled to the ownership of the property. The REO (real estate owned) property then gets listed as a non-performing asset.

Jeff Adams has been a real estate innovator for more than 35 years now. He believes investment in REO properties is a good avenue for investors with ready cash and most importantly, patience. Investors should not have unrealistic expectations when it comes to REO properties. These may come at lower rates; however, the costs that need to be incurred on repairs could be substantially high.

Take a look at some of the do’s and don’ts if you’re considering investing in an REO property.


  •  Refer to trusted and well-known websites if you’re looking for good REO property deals. It is a good practice to consult successful real estate investors. They can help you locate properties and web portals that list REO properties.


  • Consider several hidden costs. There could be structural repairs, unpaid bills, fees or taxes involved. Make sure you have access to all the required information. Legal documentation and title of ownership must be in place. Keep a track of the history of the property.


  • Find agents or brokers in your area that can help you find good REO properties. These agents must specialize in REO. Make sure these agents are reliable. Visit their websites or consult other investors who may have worked with these brokers / agents in the past.



  •  Be overtly pleased with a great deal. An REO property gets transferred ‘as is’ and is often in need of urgent repairs.


  • Sign up hastily on numerous websites. Most of these contain tons of options that may have already been sold off.


  • Contact the banks directly. You are likely to get stuck in a long wait on the call. Moreover, the chances of getting the right contact person are rare.


  • Hesitate to negotiate with the bank again. If you receive an offer rejection, wait for a month and try again. After the second negotiation, you could wait for a period of 10 more days for the bank to respond.


The bottom line, as suggested by Jeff Adams, is to have your finance ready. All real estate transactions require substantial amount of cash. Make sure you do not have to run from pillar to post for this at the last minute after everything else falls in place.