What Is Different About Buying REOs, Or Wholesale Properties?

If you are buying your first home or haven’t purchased a home in years you will notice a lot of new terms being used in the real estate industry. Many of these are used to define different types of properties. This includes short sales, REOs and wholesale properties. So what do they mean exactly and how are they different to buying other homes?

Short Sales
Short sales are homes which are being sold for less then the mortgage balance owed on them. The mortgage balance makes no difference to you as you will receive the property free and clear when you purchase it, though they can require a little extra paperwork. This is because the acceptance of your offer is contingent upon the lender being willing to take a loss on the loan they made. It happens every day, but requires someone with experience who knows just how the lender likes the paperwork submitted and who knows how to justify your offer and present it in the best light. Short sales can take a little longer to close on though they are often able to be bought at as low as 30-50% of the amount previously loaned on them.

REOs
REO stands for Real Estate Owned. These are properties that have been taken over the bank or mortgage lender who made a loan on them which defaulted. REOs offer great deals as the banks or lenders holding them are eager to get them off of their books and recoup what capital they can to lend out to better borrowers on loans that will perform. Great discounts can be had when buying REOs however it is also important to keep in mind that banks and lenders will want to control much of the transaction and do things on their terms which can mean a little extra paperwork and often not the easiest people to negotiate with. Yet they still present great bargains whether you are looking for your first home or are a real estate investor.

Wholesale Properties
You may also see ‘wholesale properties’ being advertised as well. These homes are often targeted towards investors as they often need repair work done. Basically they are usually in pre-retail condition. Investors normally buy these properties at huge discounts then rehab them and put them right back on the market for sizable profits. However these homes are great for anyone as long as you don’t mind doing a little fixing up yourself. Though you will have to be prepared to move quickly and often will be required to close on them within a couple of weeks. This means you will generally either need cash or a hard money loan to expedite the process.