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What Are REOs
What does it mean by REOs?
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2 Replies
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“Real Estate Owned” (REO) is used in mortgage lending. It refers to a property owned by a lender, usually a bank, after an unsuccessful sale at a foreclosure auction. Here’s what it means:
What does REO mean?
Definition:
Real Estate Owned (REO): Properties that have reverted to the lender after an unsuccessful foreclosure auction
How does a property become an REO?
Default: The property owner fails to make required mortgage payments and goes into default.
Foreclosure: The lender starts legal proceedings to recover the amount owed on the loan.
Auction: The property is sold at auction; if no acceptable bids are made, ownership reverts to the bank.
REO status: Property becomes part of the bank’s REO inventory
Characteristics of REO properties
Lender-owned: A bank or other financial institution owns the property.
Condition: REOs can be in various states of disrepair; they often are sold “as is,” with no repairs or improvements made by the bank.
Clear title: Lien and tax problems should be cleared up by the lender, which then makes sure that when it sells, the title will be free and clear of such issues
Discounted prices: Banks want to recoup as much money as possible from their bad loans so that they will price these homes below market value.
The REO process
Acquisition: The bank takes possession of the property after the failed auction.
Assessment: The bank has someone determine the market value and needed repairs for every home in its portfolio.
Maintenance/repair: Basic maintenance is done when necessary to preserve the value of houses still being marketed. More extensive repairs are performed only if cost-effective, given current market conditions. Otherwise, those units may sit vacant until selling proves profitable years later. It depends upon the area specifics involved here, whether urban, suburban, rural locations, etcetera…
The marketing time frame varies widely but typically ranges between three months to two years…
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REO are bank owned properties. REAL ESTATE OWNED