What exactly is an REO Property?

By Joe Pecoraro

An REO property is simply a Bank or Lender owned property. The term REO is an acronym for "Real Estate Owned" which banks use to describe a property that has already gone through the foreclosure process but did not sell at a Trustee's Sale. 

There can be many reasons a home didn't sell at the Trustee Sale but the most common reason is that the property is no longer worth what is owed to the lender.    

Therefore, a buyer looking for a deal would not be interested in satisfying the debt including the late charges and attorney fees which normally sum up the minimum bid at a Trustee's Sale. 

Another downside to a Trustee's Sale besides paying more than the current market value (do you really need one?) is there are no negotiations with the seller (read bank).  It is an auction and the highest bidder wins.

So when is the best time to buy a foreclosed property?

Typically the best time to buy a foreclosed property is when it comes on the market as an REO. This is when you might be able to actually "wheel and deal" with the lender and get the best price on the property.

The reason being that after the unsuccessful Trustee's Sale, the lender will then consult with a Real Estate Broker and get their opinion of the fair market value for the property. A good Broker will give the Lender a true market value not taking into consideration what the Lender was originally owed on the property. For the most part REOs come on the market at a fair price and have at least some room for negotiation.

In conclusion let me say that an REO Property might not be for everyone (we will get into the pros and cons later). However, if you are looking for a way to buy Real Estate at a great price, deal with an emotionless seller and have instant equity, you will definitely want to take a look at REO's.

Until next time...