Pros

 There are no liens or judgments to contend with, no homeowners or tenants to evict, no back taxes due, and accessing the home for evaluation or inspections is easy. All liens against the home are removed once it becomes an REO, and taxes are paid. The fact that the home has officially changed hands from the homeowner to the lender means that the lender has done all the work. With all the legal work completed, the complications of buying and the associated risks are removed.

 Most bank owned property are below market value. Lower down payments, better interest rates, reduced closing costs and a discount off the market value of the property, taken all together, make for a better than average home purchase. A properly structured deal will give you a low down payment, low monthly payments, and a low total price. For those looking to save money buying their first home, this is usually the way to go.

 Unlike properties at foreclosure auction, REOs can be inspected prior to contract, and are listed with real estate agents.

 While many foreclosures are often in deplorable condition, REOs are typically restored to at least a readily salable condition by the lending bank. The lender that owns the property will often offer financing with better deals than they would offer on traditional properties and will often provide an allowance for certain repairs.

 You can save money in your title search if you use the same title company that the lender used during foreclosure. REOs will often times include appliances

 Cons

 The biggest disadvantage of a Bank owned property is that you will not know much about the past history of the home. Another big disadvantage is that most Bank owned properties are not in good condition. You may need to call the gas, water & electric companies to get them turned on & also you will have to pay for all repairs.

Bank owned property is also known as REO property. REO stands for Real Estate Owned. An REO or bank owned property is one that has come back into the lender’s portfolio through the foreclosure process. The terms REO or bank owned properties mean the same – properties that have come back into the lender’s portfolio through the foreclosure process.

When a property is sold through a foreclosure auction, its owner usually owes more to the lender than the market value of the property itself. This is often a barrier to selling the property, and sometimes such foreclosure auctions do not draw any bidders. As a result, not many foreclosure auctions end with the sale of the property, rather the title reverts back to the lender holding the lien. The property reverts to the lender’s portfolio and becomes a bank owned or REO property.

 If you are looking to buy a house as your primary residence or for investment purposes, you can get a huge discount by buying a bank owned property. Most lenders sell bank owned properties below market value.

 Before you buy a bank owned property, make sure you conduct a physical inspection of the property. Bank owned properties are generally sold “as is” which means that the discount you just saved on the purchase price can easily be eaten up by unforeseen expenses such as repairs not immediately apparent in an exterior inspection. Most homes go into foreclosure because the homeowner has financial difficulties. When the homeowner has financial difficulties, the homeowner is unlikely to spend money on maintenance which usually means that the house has not received needed repairs or general maintenance for a while. Sometime a frustrated homeowner who looses a home in foreclosure may vent his frustration on the home and damage the property. You must be prepared to do renovations and repairs.