Difference Between a Bank Auction and REO purchase

There are several differences between purchasing a home at a foreclosure auction and purchasing a home that has already been foreclosed on; the REO. These differences vary from state-to-state and bank-to-bank, but generally if you purchase a home at auction, you should consider the following:

  1. Bank Auction homes will likely be sold in "as is" condition. Many of these homes are in varying states of disrepair. If you win the Bank Auction, you may need to pay for added expenses as well as have to deal with various situations, such as possibly evicting the family that is still living in the house.
  2. In purchasing a Bank Auction home, you will need to make sure there is a clear title. Many times, families that go into foreclosure have many other debts and possible liens.
  3. To purchase a Bank Auction home, you will need to have your financing in place and ready to go immediately after your bid has won.

When buying a Bank-Owned property most of the above issues are addressed by the mortgage bank. For the inexperienced home buyer and investor alike, purchasing an REO or Bank-Owned property is much easier.

Purchasing a bank auctioned home can often provide significant savings if you are prepared to deal with all of the above issues. Again, they may vary from state-to-state and bank-to-bank.

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Additional considerations are that the auction home is sold in "as is" condition, you will need to have your financing in place

REO purchase vs. Bank auction purchase

There are differences between purchasing a foreclosure property at a bank auction and purchasing a bank-owned property from a lender’s inventory. It can vary from lender-to-lender and from state-to-state.

In summary, the major differences between purchasing a foreclosure property at a bank auction, and from purchasing a bank-owned property are: whether or not the title is clear, the asking price, possibly evicting the occupants, preparing your offer, presenting your offer, seller financing, and the “as is” condition of the property.

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