What is an REO Property

Home » Buy A Home » The Home Buying Process » What is an REO Property

REO home stands for "Real Estate Owned", which refers to bank-owned properties or foreclosed properties. You may are thinking about buying a foreclosure home, but don't know where to start or what to expect. It is important to understand the benefits and challenges this type of listing may hold in store for any buyer.

What does "REO" really mean?

This means the homeowner was unable to make the payments on the home, and the bank foreclosed on the property and has taken possession of the property. Typically what happens is the owner fell behind on the payments and no other options left. They may have attempted to sell the property using what's called a "Sort Sale", meaning the lender would take less than what was owed on the mortgage, in an effort to recover  some of what was owed. A short sale is different than a REO,  and is a sellers last attempt and paying off the mortgage to avoid foreclosure. If they can't sell the home and default on the payments, the lender will either attempt to sell the home at an auction or foreclose on the house and take possetion of it from the homeowner. At that point it becomes and REO property.

These types of listings may or may not be found within the local Multiple Listing Service (MLS), which compiles a list of available real estate for sale by licensed real estate brokers. When and if an REO gets placed in the MLS varies according to the schedule and plans of each lending institution.

Are REO's A Great Deal?

That answer id a definite "maybe". You may get a deal on the selling price of the home, but you have to keep in mind that the bank will be trying to recover as much as they can of what they are owed on the home. You will need to be aware that there is a level of uncertainty and extra effort in closing on the property.

REO's offer a set of challenges and risk that is not typical with other properties. You may be responsible for extra fees and expenses during the process even if you do not end up purchasing the home. You should have a home inspection done so you know exactly what you are getting into, but you should be aware that the bank or lender is most likely not going to make any repairs or updates no matter what the findings turn out to be. This means you pay for an inspection and accept whatever needed repairs as your own responsibility, or you choose to walk away.

You should also consider the value of your time. Depending on where it is in the process, an REO home may take longer than a typical home to close, which is approximately 45-60 days. However, since the rise of foreclosures in recent years, banks have learned a lot about how to streamline the process of selling foreclosed homes.

Speak to your real estate agent about your interest in looking at REOs or bank-owned homes. For some home buyers, it can be the answer to finding a new home at a great price.

Ready to talk to an agent?

Drop us a line today!

Start Your Home Search Today!