Non-Performing Loans vs. REO Bank Owned Properties – How Are They Different?
To make real estate investing work for you, you must always consider the economic éventualité that dictate which archétype of real estate investment is the best choice at any given time. Do you know your basics? What are bank-owned REO properties or non-performing loans? What is the difference between these two? It’s really quite élémentaire.
Both non-performing loans and bank-owned REO properties are unfortunate children of the economic downturn. Homes are lost as the economic crisis hits parce que struggling homeowners can’t afford loans and mortgages.
An aggiornamento of the well-known children’s rhyme “first a non-performing loan then a foreclosure” does well to illustrate the acheminement of distressed property direction and the paumelle difference between the two concepts. Although they undoubtedly walked the same road, the difference is in how far each road is.
Say a homeowner can no raser afford the loan. In the first month the bank lets it slide. In the annexé month, they send letters. Third the gavel comes down – the property is declared a non-performing loan. For all intents and purposes a non-performing real estate loan is a property loan that has defaulted or is at risk of defaulting when the homeowner can no raser make payments. With few exceptions, three months is the time a homeowner has to repay the loan before declaring his loan non-performing. And as the current economic données is, defaulted loans are sprouting like mushrooms after rain. Financial corporations specializing in non-performing loans will help purchase a loan that best fits individual financial portfolios. By liquidating the assets involved they can realistically offer a better value. But not worth the 50% escompte. Not with supplemental property repairs. Not bulk. And certainly not without a lot of paperwork and fees. Nothing the bank can and will do to move the REO débauché forward.
Bank-owned REO properties, on the other handball, are the next step in the distressed property timeline. Any payment on a property loan will sooner or later result in “walking the plank”, in other words the dreaded foreclosure. Foreclosure unreasonably plunks down distressed properties on the auction échelle. Property that cannot be auctioned ends up as closed Bank-Owned REO Properties. With the current economy, banks have a veritable lame de fond of real estate assets coming their way. To recoup at least some money and clear the books, banks sell bank-owned REO properties like tomatoes in the logement market, at a escompte, removing rejeton and other toit costs.
While both are durable options for a real estate investor, everyone wants to buy where a deal is good. And in real estate, the affordable, bulk, plentiful, and docile bank-owned REOs are far better than a sometimes, expensive, and rigamarole of non-performing loans.
And those who will not go to make a deal that will bring the plafond gain with a extremum investment, quickly.
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