Repo houses are homes that have been repossessed or foreclosed by lenders because the borrower was unable to pay back the mortgage amount. If you are planning to move into a dream house or want to develop a mini real estate empire, you would do well to check out repo houses.
Repossessed houses can often be found for 20 to 30 percent off of the appraisal value. Whether you are buying a home that you will live in, a home you can fix up and flip, or a series of homes that you can rent for ongoing income, repossessed homes can let you get more for your money.
The economic crash has lead to a glut of repo houses. Bad mortgages were written that allowed homeowners to get into homes with exploding adjustable rate mortgages or by only paying interest for a period of a couple of years. After the initial “teaser” rate was up, the homeowner could not afford the mortgage payment. Why no one saw this coming is a mystery, but banks have suddenly ended up with a large inventory of vacant homes.
Now, banks are not in the business of selling or renting property. They want to make and service loans. Lenders want to get rid of the homes on their rolls immediately. Part of this is because these homes hurt their overall financial picture – their “bottom line.” Not too long ago, the mortgages showed up on their balance sheets as assets. Now the vacant homes appear on the books as liabilities. Additionally, the vacant homes cost them money in terms of insurance, maintenance, and property taxes.
So, the banks are willing to get rid of the homes at very attractive prices.
If you are looking for a primary residence or vacation home that you plan to use yourself, taking a look at repo homes can make a lot of sense. You will see repossessed homes as just one of the options you have for finding the best deal on your dream home. You will take the same factors into consideration when you buy a foreclosed real estate property, that you would if you were buying a home from a homeowner.
The dynamics change some when you are buying a house as an investment. Because you are planning to re-sell or rent out the property, you have to take the market value into consideration. For instance, how much work does the property require to make it attractive to a new buyer? Many bank owned homes have been gutted by the homeowner who was forced to move. They vandalize the place or take out anything that could be sold. There have even been cases of people stripping the copper piping to sell for scrap.
There is also the consideration of whether repo homes are in neighborhoods with large vacancy rates. It’s hard to find a buyer or renter who wants to move into a virtual “ghost town.” Also, if there are a lot of vacancies, it will depress the prices of all of the houses in the area.
Many investors are interested in repo houses because they can purchase these foreclosed homes at cheap prices. They have a large profit margin between the price they pay the bank and the price they can sell the property to another buyer. Others, thinking about the long term value of rental property, see buying houses during this economic downturn as an excellent investment.
If you are looking for repo houses, you should invest in a regularly updated database of available homes. These services give you a constant supply of new repo houses.Texas Real Estate Commission Information About Brokerage Services