Ask Stacy: Should I Buy an REO or Foreclosed Home?

Foreclosure Homes
Photo by Andy Dean Photography / Shutterstock.com

Welcome to “Ask Stacy,” a short video feature answering money questions submitted by readers and viewers.

Today’s question is about buying real estate; specifically, the pluses and minuses of buying foreclosures or repossessed homes.

I live in South Florida, the center of the nationwide real estate crash that spawned the Great Recession. I did lots of stories about foreclosures back then, and even attended several foreclosure auctions, both in my role as a reporter and as an investor.

One thing I learned: Not all foreclosures are created equal and not all are suitable for small investors.

Watch the following video to get the information you need before you travel this potentially perilous path. Or, if you prefer, scroll down to read the full transcript and find out what I said. You also can learn how to send in a question of your own below.

For more information on this topic, check out “How NOT to Buy a Foreclosure” and “How to Steal a House – 4 Steps to Buying an REO.” You can also go to the search at the top of this page, put in the word “foreclosure” and find plenty of information on just about everything relating to this topic.

And if you’re looking for the best deal on a mortgage, be sure and visit the mortgage comparison page of our Solutions Center.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, everyone, and welcome to your money Q&A question of the day. I’m your host, Stacy Johnson, and this question is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.

Let’s look at today’s question. It comes to us from Victoria:

“Is buying a repo a good idea?”

I’m going to assume that Victoria’s talking about a repossessed or foreclosed home.

Victoria, the first thing you need to know is that there are two types of foreclosures. One is called a judicial foreclosure, which means the repossessed home went through the court system. The other kind of repo you’ll often hear about is when the mortgage holder takes a house back, then lists it through a Realtor. This is often called an REO listing, which stands for “real estate owned.”

When you shop judicial foreclosures, you’re likely attending an auction. The rules are different in different states, but generally speaking, you’re going to be standing in a crowd of people and bidding on a home that you’ve not had the opportunity to inspect, or even see from the inside. You will also have no opportunity to get a mortgage.

In other words, you’re going to have to pay cash — often within 24 hours — for a house you haven’t inspected, and may not have even done a title search on. You’ll also likely be competing against deep-pocketed professional investors with years of experience.

This type of repo buying may be the best way to get a screaming deal on property, but it’s far too risky for most people. In my opinion, it’s suitable only for experienced professionals.

I’ve covered a couple of these auctions in my news career, and even participated in one or two as an investor. It’s an interesting thing to watch, and I’d encourage you to check out an auction or two. Just don’t raise your hand and buy anything until you’re absolutely, positively sure you know what you’re doing. So, for the sake of this discussion, let’s forget judicial foreclosures. If you want to pursue that, great. But you’ve got a lot of studying to do.

Now let’s move on to the more typical repo; the kind where a bank or other lender takes back a house because the owner didn’t make the mortgage payments. It may have gone through judicial foreclosure, but the bank won the bid, now owns it and is listing it through a Realtor.

In most ways, this type of repo is like any other home listed through a Realtor. The bank has taken back the house and hired a Realtor, just like you would if you had a house for sale. The bank has then put the house on the market. In this case, the buyer has the opportunity to inspect the house.

Often these houses aren’t in the best of shape, so you might get a better deal. If you’re a fix-up type of person, this may be a good way for you to get some sweat equity. But essentially, the process is like that of buying the typical house. You get it inspected. You have the opportunity to get financing.

Bottom line? While I’d discourage you from investing in judicial foreclosures, I’d encourage you to check out bank-owned property, especially if you’re the type who likes to fix things up.

I hope that answers your question, Victoria. Now let’s close with our quote of the day. This one comes from Criss Jami, philosopher, poet and author.

“In the fashion industry, everything goes retro except the prices.”

Have a super-profitable day and meet me right here next time!

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter, just as you would with any email in your inbox. If you’re not subscribed, fix that right now by clicking here. It’s free, only takes a few seconds, and will get you valuable information every day!

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got any words of wisdom you can offer on today’s question? Share your knowledge and experiences on our Facebook page. And if you find this information useful, please share it!

Got more money questions? Browse lots more Ask Stacy answers here.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
21 Purchases You Should Never Skimp On
21 Purchases You Should Never Skimp On

With some items, it makes sense to pay a little more rather than hopping on the lowest price.

8 Products to Reduce Anxiety and Stress
8 Products to Reduce Anxiety and Stress

Current events have you feeling anxious? These Amazon products can take the edge off.

How to Stop Living Paycheck to Paycheck in 8 Steps
How to Stop Living Paycheck to Paycheck in 8 Steps

Does it feel like your paycheck is gone the moment you get it? You can break that vicious cycle.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

10 Things You Should Never Do With Bleach
10 Things You Should Never Do With Bleach

Does the pandemic have you reaching for bleach more than ever before? Learn the ins and outs of using this powerful disinfectant.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.