The key to making real estate investing work for you is you must always take into account all the factors surrounding a deal. Once you have your real estate comps information from your InvestorComps account, then the question becomes…..What are the basics? Exactly what are Bank Owned REO Properties or non performing loans? What is the difference between the two???
Let’s take a quick look at these two concepts and hash this out…shall we?
Say a homeowner cannot afford to pay a loan anymore. First month the bank lets it slide. The second month, they mail the letter. The third the gavel comes down – the property has been declared a non-performing loan. For all intents and purposes a non-performing real estate loan is a property loan that has defaulted or is in danger of defaulting when homeowners cannot make payments any longer. With some exceptions, three months is all a homeowner has to make payments before his loan is declared non-performing. And current economic conditions being as they are, non-performing loans are becoming more and more common.
Financial corporations specializing in non performing loans will help with purchasing a loan that best fits an investors financial portfolios. By liquidating involved assets they can realistically provide a good value. But not a 50% discounted price and certainly not bulk or not without tons of paperwork and fees. None of these things a NPL can or will do to move the sale along.
Bank owned REO property, on the other hand, is the next step in the distressed property time line. No payment on a property loan will sooner or later result in dreaded foreclosure. Foreclosure inevitably plunks down distressed property to the auction table. Properties that cannot be auctioned off end up as Bank Owned REO Properties. With the current economy banks have a veritable tsunami of real estate properties coming their way. Wildly scrambling to regain at least some money and clear the books, banks sell Bank Owned REO Properties like fruit on local market, at a discount, liens and other expenses on the home removed.
I say be ready do so some shopping! Having done research on neighborhoods you may want to invest in is a wise way to be prepared when these auctions begin.
While both are viable options for a real estate investor, everyone wants to buy where a deal is better. And in real estate, affordable, bulk, plenty and flexible of Bank Owned REO is a far better than the sometimes costly run around of a non-performing loan.
Doing your due diligence will make you ready and in the right position when the opportune deal comes your way!