Non Performing Loans Vs REO Bank Owned Property – How Do They Differ?

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To make real estate investing work for you, you must always take into consideration economic conditions that dictate which type 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 the two? It is quite simple really.

Both non-performing loans and Bank Owned REO Properties are the unfortunate children of economic fall down. As economic crisis takes swing so does losing homes as struggling homeowners cannot keep up with loans and mortgages.

An adaptation of the well know children rhyme “First comes a non performing loan then a foreclosure” does well to illustrate the progression of distressed property handling and the major difference between the two concepts. Whereas they undoubtedly trod the same road, the difference in how far along the road each is.

Say a homeowner cannot afford to pay a loan anymore. First month the bank lets it slide. The second month, they mail the letter. The third the gavel comes down – the property has been declared a non-performing loan. For all intents and purposes non-performing real estate loan is a property loan that has defaulted or is in danger of defaulting when homeowner cannot make payments any longer. With some exceptions, three months is all a homeowner has to turn over the dough before his loan is declared non-performing. And current economic conditions being as they are, non-performing loans are sprouting like mushrooms after rain. Financial corporations specializing in non performing loans will help with purchasing a loan that best fits individual financial portfolios. By liquidating involved assets they can realistically provide a good value. But not a 50% discounted price. Not with complementary property repairs. Not bulk. And certainly not without tons of paperwork and fees. None of the things Banks Owned REO can and will do to move the sale along.

Bank owned REO property, on the other hand, is the next step in the distressed property timeline. No payment on a property loan will sooner or later result in “walking the plank”, in other words the dreaded foreclosure. Foreclosure unceremoniously plunks down distressed property to the auction table. Properties that cannot be auctioned off it end up as Bank Owned REO Properties. With current economy banks have a veritable tsunami of real estate properties coming their way. Wildly scrambling to regains at least some money and clear the books, banks sell Bank Owned REO Properties like tomatoes on local market, at a discount, liens and other expenses on the home removed.

While both are viable options for a real estate investor, everyone wants to buy where a deal is better. And in real estate, affordable, bulk, plenty and flexible of Bank Owned REO is a far better than a sometimes, costly, and rigamarole non-performing loan.

And who wouldn’t go for a deal that will brings maximum profit on a minimum investment, fast.

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Original article by Mark Bradley