REOs: Money Pits or Glory Holes?
Most of us in this day and age are familiar with the abbreviation "REO" for real estate owned, otherwise known as a bank-owned foreclosure property. The term is generally used (and specifically now by the Northern Nevada Regional Multiple Listing Service) to include all foreclosures, including those currently held by Fannie Mae, Freddie Mac, and HUD, which of course are not banks. Now I remember back in the day when these properties were called OREOs, "other" having been added to the moniker for some unknown reason hopefully more important than making a cutesy acronym.
And most of us, if not personally familiar with the description "money pit" have at least seen the movie by the same name. If not, use your imagination! On the other hand, those not from these-here parts (that would be Northern Nevada, pilgrim!) may be less familiar with the term "glory hole". Glory Hole was a term, and in some cases actual name, applied to certain ore mines, particularly those rich in minerals such as silver and gold; a site where one might, with luck, become fabulously wealthy. (Yes, I have indeed discovered that the term "glory hole" has been hijacked in recent times by pornographers, but that doesn't detract from its historical significance.)
So back to the subject at hand, for all of you that didn't immediately leave me to Google "glory hole" after that last observation. Which category might we expect an REO to fall into? The answer: BOTH!
On the one hand, the Money Pit. Picture yourself in the homeowners's shoes. The bank is banging on the door, demanding
the deed to your property. You know it is just a matter of time until they prevail. So, being as you're a bit short of cash (hence your circumstances), you decide to start putting whatever you have aside to begin anew after the inevitable. No maintenance to the property. No yard work. Nothing that requires investment on your part into a property you are gradually divorcing yourself from. Then, on the flight out the door as the sheriff's posse moseys down the street, you remove every item of conceivable value. Depending on your level of irritation and technical skill, that might include appliances, ceiling fans and light fixtures, perhaps the HVAC system or hot water heater; you get the picture. If you are really pissed off, you might knock a few holes in the wall, let your pets do their business all over the wall to wall carpeting, flush cement down the toilets, and so on. But even if you are the most earnest, well-meaning foreclosee on the planet, and remarkably there are MANY of those, there is deferred maintenance with a capital D left behind. Yes, it may appear from a casual review of a comparative market analysis that the property is a "deal", but it had better be more than that. What crazed buyer would pay a below the market price only to slave away on fixer-uppering to end up paying the same amount they could have bought a pristine, no-special-conditions property for, not even including any value for their sweat and toil?
But ahhhh! We have all heard tell of the investor that struck gold...the proverbial glory hole of REO properties. The score on the courthouse steps that no one else recognized for the killer deal it was. The less killer, but still respectable, profit being made by those in the know. Yes, it IS out there. And there are plenty of foreclosures to go around. Interested? Call us!
Photo Credits: Abandoned Nevada Mine by RickC, Glory Hole by btsiders, Crowne-Bars by digitalmoneyworld. All from Flickr via Creative Commons license
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