Real Estate Owned - REO

“Real estate owned,” or REO (not the SpeedWagon), is a term we use to describe a property that a bank has foreclosed on...but then couldn’t sell at auction.

Let’s say that Bucolic Bank extended a home loan to Greg for his new $250,000 house, but then Greg’s life hit some unexpected speedbumps, and he ended up not being able to make his mortgage payments. Eventually, Bucolic Bank had to foreclose on Greg’s house, which means they basically took possession of it for nonpayment. When banks do this, they usually turn around and try to sell the house at auction so they can recoup some of their losses. But in this case, Bucolic Bank heard from a friend who heard from a friend who heard from another that this house just was not going to sell. So they took it off the market, and it became theirs. In other words, it became an REO property.

The good news is that REO properties don’t just vanish off the market forever. Banks will almost always re-list them, usually at a steep discount. So if we’re messing around online and find an REO property that we just have to have because we can’t fight our feelings about it anymore, we can usually work out a pretty sweet deal with the bank and buy it.