REO Investing – Why the REO Boom?

REO properties are coming on the market faster than ever and investors and non-investors alike are taking notice of all the great deals!

These properties are proving to be the true “deep discount” properties on the market making them a great option for investors or simply a great deal for would be home owners. So you may be asking “Why now? The real estate market has been down for several years.”

Understanding market conditions, how the market got to where it is and where it is possible going next is vital to your investing career and your success.

There are several reasons we are seeing a huge influx of REO properties hit the market right now.

Didn’t See it Coming

First and foremost, like most people, the banks didn’t see this market coming. Sure, some predicted a “hiccup” in the market, but most had no idea how big or how long that “hiccup” would be or last. And, it took some time for them to really start to realize that they had a real problem on their hands.

Overload of Defaulted Loans

Once the banks realized that they had a real problem, they got overloaded with defaulted loans and simply were shell-shocked. The solution initially was to do nothing. They were simply in denial.

Thought they could ride it out the Storm

Another big factor is that they figured they would be able to simply ride out the storm. Why spend all the time, money, and resource to “take action” when the storm will just blow over. Well, the storm didn’t just blow over and they eventually realized they would have to deal with the “bad child”.

Simply Didn’t Have the Staff or Processes

Once the banks decided to jump into action, they quickly realized the where jumping right into the middle of a huge black whole. They didn’t have the process, staff, or even the knowledge to process the backlog of defaults they already had in hand; all while still be flooded with new defaults every day.

Waiting for Someone Else to Save the Day:

As with many folks, they figured someone else; mainly the federal government, would come in and save the day. As we all found out, that did not happen and the problem only kept getting worse. So now that we know how we got here, what will happen next?

No one can truly predict the future but it does appear that banks are finally processing and completing the foreclosure process and taking the properties back at a much faster rate than over the last few years. Meaning, more REO deals will continue to hit the market at a feverish rate and should provide an ongoing funnel of great deals.