Especially for novice investors, foreclosures may represent financial risks or may be difficult to evaluate in terms of their market value or true equity. Those will little knowledge of the real estate business may be intimidated – and rightly so – by the prospect of going to the courthouse with a cashier’s check for a large sum of money to bid on a property they may know little about. Of course all of those factors can be managed effectively, prudently, and successfully – which is why investing in foreclosures is one of the easiest ways to make money in real estate.

But REO properties can offer many of the same benefits as “regular” foreclosures, without special skills, insights, or experience. That’ s because you can buy this special category of foreclosures – which are, technically speaking, post-foreclosure properties – the same way you would buy any other home listed with a Realtor.

For instance:

• You can browse a large inventory of homes, in a variety of different locations, at your leisure – or attend REO open houses.
• When buying an REO you can use conventional mortgage financing and buy with little or no money down, depending upon which loan you choose.
• You have the time to schedule structural, mechanical, and environmental inspections, and can ask for repair allowances for any problems that those inspection reports might reveal.

In order to take the best advantage of the REO market, it helps to have professional relationships with the REO departments of your local banks or mortgage companies as well as with Realtors specializing in REO listings. Once you get your name on their contact lists, it is easier to get updated information about properties coming online. Being first in line can ensure that you have the first shot at the best properties before the general public gets involved.

Keep in mind that the listing prices of REOs are sometimes inflated by brokers, either on purpose or because of an error in judgment. It always pays to conduct your own due diligent research to ascertain the actual market value or range of values for a particular REO at a specific point in time. The most successful investors devote a great deal of attention to studying the market, crunching numbers, and scouting out the diamonds in the rough of REO inventories.

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