What is an REO and Where can You Find Them?

What is an REO and Where can You Find Them?

If a foreclosed property does not sell at public auction, the lender, usually a bank, takes title and it becomes Real Estate Owned (REO) by the lender. Since the lender does not want a non-performing asset on its books, it will clear the title (get rid of liens against it), maybe do some cosmetic repairs to the property, and put it back on the market at a discount to get it sold.

Note: Not all liens are cleared on all foreclosures. Have your attorney run a title search before you purchase any foreclosure to make sure all of the liens have been removed.

The reason you hear about so many REO’s right now is that most of the properties up for sale at foreclosure auction are worth less than the total amount owed to the bank. Typically, the minimum opening bid at foreclosure auctions equals: the outstanding loan amount, plus the accrued interest, plus any fees associated with the foreclosure sale. These properties aren’t selling at foreclosure auctions because the opening bid is just too high. The lenders are then forced to take these properties over to satisfy the unpaid balance of their loans, then sell them at a discount to move them quickly.

Because REO’s are often listed with Realtors, you can find many listed on the MLS. You can also find them by searching foreclosure listings at the courthouse, often before they’re listed with a Realtor, which enables you to negotiate a purchase directly with the bank.

Here are some online resources for finding REO’s:

Please let me know here if you find one and share how your process went!

This post has 4 Comments | Would you like to leave a comment?

4 Comments

  1. You’re welcome!

  2. Thanks for the great information.

  3. Glad you can use it!

  4. Great information as always!

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