A little on REO properties

Posted on 10/20/10 No Comments

REO homes are different than foreclosure sales

We understand that there is a lot of talk today about foreclosures. It’s a tough reality that we as Realtor’s® seem to be learning something new about every day.

The most recent mess, which has banks around the country temporarily halting foreclosures because of “paperwork issues” is only serving to further confuse. So, we’ll try to shed as much light as possible on this ever-evolving segment of our industry. As agents in today’s market, it’s simply a part of our job.

Naturally, a lot of homebuyers in the market are interested in the savings a foreclosure sale offers. However, when poking around for possibilities, they may run into another bit of industry jargon that is often mistakenly thought of as just a synonym for foreclosure. And that’s the term “REO.”

While most commonly thought of as the suffix for a highly over-rated but nonetheless quintessential 80’s power-ballad band, in our world REO stands for “Real Estate Owned.” What it means is that the home in question is currently owned by the bank or lender. Thus, the lender has taken back the home and in that case, is the seller. A home becomes an REO asset after the house is not sold in foreclosure.

On the other hand, foreclosure, technically, is a legal term for the process banks use to gain control of an asset on which they have loaned money. Remember that foreclosed homes are sold through an auction and require you to have a check on hand should you win the auction. The price typically includes the remaining mortgage, assorted legal fees and costs associated with bank’s process. And, you will have to pay for any liens currently on the home, like unpaid plumbing repairs. That’s a good time.

REO sales are often sold “as-is” and are not always a great deal. (But they can be.) Banks are very careful about getting the most money possible and avoid at all costs setting a precedent for selling low. They can also be difficult with which to negotiate because unlike an individual home seller, there is very little emotional investment. A bank doesn’t need to move by a certain date or have its eyes on another home. Plus, your offer has to be approved by multiple parties and can get buried in the bureaucracy of a large corporate entity.

We would be glad to answer some questions for you on REO properties, foreclosures and short sales if you have them. Again, we understand today’s headlines can make it tough on those looking to change addresses. There’s a lot of information flying around out there.

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