Real Estate Owned (REO)
Real estate owned or REO is a class
of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure
auction. This is common because most of the properties up for sale at these auctions are
worth less than the total amount owed to the bank. The minimum bid in most foreclosure auctions
equals the outstanding loan amount, the accrued interest and any costs associated with the
foreclosure sale including attorneys' fees.
After an unsuccessful auction, the bank will go through the process of trying to sell the
property on its own. It will remove some of the liens and other expenses on the home and try to
resell it to the public, either through future auctions or direct marketing through a Realtor.
Generally speaking, bank REO properties are in poor shape in terms of repairs and maintenance;
however, real estate investors will often go after these properties as banks are not in the
business of owning homes and so, in some cases, the low price can more than compensate for the
condition of the property.
Once a property is REO, the bank or lender will try to get rid of the property by either selling
it directly themselves or thru an established broker. Many larger banks such as Bank of America
and Wells Fargo have REO/asset management departments that will field bids and offers, oversee
upkeep and handle sales. These banks typically have these searchable listings available on their
websites. A free list of bank "REO pages" can be found on thru external links listed below.
