Repo homes are houses that lenders repossessed or foreclosed because the borrower could not repay the mortgage he or she took out. If you always dreamt of living in an elegant house or would like to start investing in real estate, researching the market for repo homes for sale is a solid option.
It is not rare to find repossessed homes for 20 to 30% off the appraised value. Regardless if you would like to purchase a house to live in, a house you would like to repair and sell or several repos to rent for regular monthly income, repo houses can be a good investment.
Why are there so many repossessed homes for sale?
Sadly, the difficult economic downturn has led to an excess inventory of repo homes. Lenders accepted bad mortgages that made it possible for homeowners to buy properties with bursting adjustable rate mortgages or by merely paying out interest for a few years. Following the very favorable initial conditions the rate soared
seriously and as a result many homeowners were unable to make the month-to-month mortgage repayments. As a result, most banking institutions currently find themselves with a very large stock of empty properties.
Banks don’t accumulate repossessed houses; they want to sell them
Banks are certainly not interested in selling and leasing real estate property, but in making and servicing loans. Therefore, lenders do all they can to get rid of their inventory of foreclosed houses and repo homes as soon as possible as they are detrimental to their finances in general.
Picture this: today the mortgages they hold are an asset; tomorrow the foreclosed houses corresponding to those home loans are a liability. And this is not all, as they now must pay repairs and maintenance, taxes and property insurance coverage, so there are additional costs involved that do not make sense for loan companies.
Do you understand now why any financial institution specialized in lending money will want to sell their repo homes as fast as possible in order to eliminate those unwanted costs from their books?
Buying repo homes for sale to live in
If you are searching for repo homes for sale to purchase one for your family to live in or perhaps a getaway property that you intend to use yourself, checking out repo homes can be a very good idea. Repossessed homes are one additional alternative in your quest to find the house you always wanted to live in. However, you need to behave with the same judiciousness when buying repo homes from banks, as you would show when buying a house from a homeowner via the standard property purchase procedure.
Purchasing repo houses as an investment
The thinking process varies a little when you purchase repo houses for sale as an investment. Since you intend to sell or lease out the house or property, you need to consider the market value as well. For example, what amount of repairs will the house need to really make it appealing to another buyer?
Some homeowners, when they lose their homes to a foreclosure process and are repossessed by the lender, damage the properties, taking everything that can be sold. In extreme cases, some of them even vandalize the repo houses and strip elements like the copper piping. For this reason, sometimes repo homes or bank owned foreclosures are not in the best of conditions and need repairs that you have to take into account before buying any repo home as an investment.
Another consideration you have to ponder is the neighborhood where the repo homes you want to buy stand. Are there large vacancy rates nearby? If the answer is yes, think it twice before buying it, as it is much more difficult to find buyers for houses surrounded by many empty properties. At the same time, such circumstances lower the real estate market prices of the whole area.
As you can see, repo homes are interesting for small investors because they can get very good deals. When doing things right, the profit margin between buying the house and reselling it is substantial. In turn, other investors prefer renting the repo homes they purchase, as they are more interested in the long-term income they will derive from the bank owned houses they acquired. A weak economy is the best for such an investment.
If you would like to invest in repo houses, make sure you subscribe to a frequently updated database of available repossessed properties. These types of services provide you with a continuous flow of new repo homes.