I recently read an article at Invesdoor.com that discusses a few important things that cash buyers may want to consider when deciding whether to pick up properties at a bank auction or purchase REO’s. The information was insightful and compelling. Here are three points that stood out most for me:
1. Outstanding debts attached to property:
a. Bank Auction – the debt typically follows the property, which means that a new owner would inherit the debt attached to the property including unexpected liens and judgements (not good).
b. REO – Bank owned properties typically come with the assurance of clear title–meaning, no surprises after closing; or at least a complete awareness of liens or judgements due.
2. Inheriting Tenants:
a. Bank Auction – Properties sold at auction typically have existing tenants or owners still in place, which means new owners may have to bear the legal expense of eviction if current occupants refuse to vacate the property.
b. REO – Banks typically go through the eviction process prior to selling; therefore, a new owner may not need to bear the legal expense of evicting occupants.
3. Deal Financing:
a. Bank Auction – Buyers need all cash upfront usually.
b. REO – Financing and terms are often available; therefore, using leverage to increase purchasing power is possible depending on the specifics of the deal.
Read full article here !