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Why Banks Want to Sell REO’s Quickly

REO's are a liability for the bank rather than as asset. The bank losses money as the property sits vacant each month. Banks gets penalized for having too many REO's. Since banks are regulated by the Federal government, if they have too many REO's they may not be allowed to borrow money from the Federal Reserve. Numerous REO's is an indication that the bank has made poor loans. Many banks are not set up to deal with REO's and therefore want to get rid of them quickly.

Banks Don't Want to Incur Carrying Costs

As soon as ownership of the property reverts back to the bank, the carrying costs associated with a foreclosed property quickly begin to accumulate. These costs can include taxes, insurance and electricity bills as well as water and sewer bills. If the property is a townhouse, there will be homeowner's association fees and condominium fees if it is a condominium. These costs continue to mount up until the property is sold which puts additional pressure on the bank to quickly sell the property. Usually, the longer a bank holds a property the more unprofitable it becomes.

Banks Don't Want to Do Repairs

You can get a good deal on homes that need allot of rennovations and repairs. In order to put the REO on the open market it needs to be in good condition. Banks are not in the renovation and repair business and do not want to deal with this. In addition, they will have to hire a real estate agent to market and sell the property which will cost them a percentage of the sales price.

Risk of Property Damage

Since most bank foreclosures are vacant, there is a risk of property damage from vandals and/or bad weather. This is just another reason for a bank to quickly move the home foreclosures out of its ownership.

Dealing With Out of State Foreclosures

Since banks own properties in different states it is likely for the bank to wind up with out of state foreclosures which makes it hard for the bank to make decisions about the sale of the property. Therefore, they are motivated to sell the property.

The banks' goal is to quickly recover the capital tied up in these non-performing loans and replace it with a new profitable loan.