What is an REO?
REO is an acronym for real estate owned and is industry jargon for foreclosure property repossessed by banks or lenders. If a lender or bank is the highest bidder a foreclosure auction — or if no third party bids at the auction — the property reverts back to the lender and becomes an REO. REOs are owned by banks. Lenders go to great lengths to sell REOs. For banks, however, bank-owned homes are a liability.
Why should I buy a buy bank-owned REO?
One of the primary advantages of buying a bank-owned REO property is that investors are purchasing a property without liens or other encumbrances. Before lenders make REO properties available for sale, they typically expunge all liens or claims against the property. Any cloud on the title — a second or third mortgage, mechanics liens, taxes or any other liens attached by creditors — are wiped out. Besides negotiating price, many buyers of REO properties also negotiate favorable lending terms below existing market rates.
What are the advantages of buying bank-owned properties or REO homes?
For real estate investors and homebuyers, bank-owned properties and REOs offer opportunities that are not available in the pre-foreclosure and auction phase of the foreclosure process. Buying bank-owned real estate offers the foreclosure buyer many advantages:
- Buying bank-owned properties involves less risk and less competition.
- Foreclosures that are owned by banks are usually clear of any liens that may have been recorded against the property.
- Since the seller of REO homes is also the lender, you can negotiate with the bank to have them pay for all or some of the closing costs.
- Bank-owned properties are usually vacant because the banks have evicted the previous owner, saving the investor or homebuyer time, money and emotional toll involved in the eviction process.
Selling REO or foreclosures has always been a ninch market for Realtors. With the downturn in the market, many Realtors that have never completed a REO transaction are now trying to break into this area of real estate. Be Careful!
I have been selling bank foreclosures for the past 14 plus years, If you have questions on buying an REO property, please feel free to email or give me a call.
Source: National Association Of Realtors | 
