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Real Estate Owned (REO)

What is 'Real Estate Owned - REO'

Real estate owned, or REO, is the name given to foreclosed-upon real estate, such as detached houses, condominiums, townhomes and land, in a bank's portfolio. Such properties end up in bank portfolios after unsuccessful sales at foreclosure auctions. A bank takes ownership of a foreclosed property when no bidder offers the amount it seeks to cover the loan. Next Up Non-REO Foreclosure Property Management Personal Property Property Tax

Explaining 'Real Estate Owned - REO'

Banks may attempt to sell real estate-owned properties in their portfolios without the help of real estate agents. When this is the case, they list the properties on the banks' website. A bank's loan officers may notify customers looking for homes about the REO properties in its portfolio. A bank may also attempt to remove some of the liens and other expenses accumulated on the title by the former owner to make the house more attractive to buyers. Real estate investors buy REO properties as banks are not in the business of owning homes and, in some cases, they may sell REO properties at a discount to their market value.

REO Specialist Role

A bank's REO specialist manages its REO properties. The REO specialist markets the properties, reviews any offers, prepares regular reports on the status of properties in the bank's portfolio and tracks down deeds. He also works closely with the bank's in-house or contracted property manager to ensure properties are secure and winterized when necessary. The REO specialist undertakes these job functions to help the bank liquidate its properties quickly and efficiently.

REO Properties and Real Estate Agents

To give REO properties the widest exposure, REO specialists often contract the services of local real estate agents to list the properties in the multiple listing service (MLS). Listing REO properties in the MLS ensures that interested real estate seekers using websites like Zillow, Realtor.com and Trulia, as well as local real estate websites, will see the listings. An REO property's listing agent brings any offers he receives to the REO specialist. Real estate agents negotiate the commission they will receive for selling REO properties with the REO specialist.

Buying an REO Property

Banks typically sell REO properties as-is, meaning the buyer buys the home and all the problems along with it. For example, a homebuyer finds her ideal home, and it is an REO property. She decides to make an offer but chooses to have the home inspected first. The results of the home inspection show that there is a problem with the plumbing. Because the subject property is REO, the home inspector's findings are for the prospective buyer's information only; she can make an offer in spite of the findings, knowing that the bank most likely will not repair any deficiencies found by the home inspector. Buyers should also search public records to ensure that all liens have been paid to ensure a smooth closing.


Further Reading


Who buys foreclosed homes? How neighborhood characteristics influence real estate-owned home sales to investors and households
www.tandfonline.com [PDF]
… Furthermore, REO properties sold by GSE are far less likely to sell to investors than REO properties owned by other real estate institutions … homeownership and neighborhood stability over other REO holders, who may be more interested in disbursing an REO property as fast …

Foreclosure, reo, and market sales in residential real estateForeclosure, reo, and market sales in residential real estate
link.springer.com [PDF]
… Furthermore, REO properties sold by GSE are far less likely to sell to investors than REO properties owned by other real estate institutions … homeownership and neighborhood stability over other REO holders, who may be more interested in disbursing an REO property as fast …

Wholesale funding and the increase in construction bank-owned real estate in the US financial crisisWholesale funding and the increase in construction bank-owned real estate in the US financial crisis
www.tandfonline.com [PDF]
… Furthermore, REO properties sold by GSE are far less likely to sell to investors than REO properties owned by other real estate institutions … homeownership and neighborhood stability over other REO holders, who may be more interested in disbursing an REO property as fast …

The optimal choice for lenders facing defaults: short sale, foreclose, or REOThe optimal choice for lenders facing defaults: short sale, foreclose, or REO
link.springer.com [PDF]
… Furthermore, REO properties sold by GSE are far less likely to sell to investors than REO properties owned by other real estate institutions … homeownership and neighborhood stability over other REO holders, who may be more interested in disbursing an REO property as fast …

The accumulation of lender-owned homes during the US mortgage crisis: Examining metropolitan REO inventoriesThe accumulation of lender-owned homes during the US mortgage crisis: Examining metropolitan REO inventories
www.tandfonline.com [PDF]
… Furthermore, REO properties sold by GSE are far less likely to sell to investors than REO properties owned by other real estate institutions … homeownership and neighborhood stability over other REO holders, who may be more interested in disbursing an REO property as fast …

Short-term own-price and spillover effects of distressed residential properties: The case of a housing crashShort-term own-price and spillover effects of distressed residential properties: The case of a housing crash
www.aresjournals.org [PDF]
… Furthermore, REO properties sold by GSE are far less likely to sell to investors than REO properties owned by other real estate institutions … homeownership and neighborhood stability over other REO holders, who may be more interested in disbursing an REO property as fast …

The trajectory of REOs in Southern California Latino neighborhoods: An uneven geography of recoveryThe trajectory of REOs in Southern California Latino neighborhoods: An uneven geography of recovery
www.tandfonline.com [PDF]
… Furthermore, REO properties sold by GSE are far less likely to sell to investors than REO properties owned by other real estate institutions … homeownership and neighborhood stability over other REO holders, who may be more interested in disbursing an REO property as fast …

The foreclosure crisis and community development: Exploring REO dynamics in hard-hit neighborhoodsThe foreclosure crisis and community development: Exploring REO dynamics in hard-hit neighborhoods
www.tandfonline.com [PDF]
… Furthermore, REO properties sold by GSE are far less likely to sell to investors than REO properties owned by other real estate institutions … homeownership and neighborhood stability over other REO holders, who may be more interested in disbursing an REO property as fast …

Market distortions when agents are better informed: The value of information in real estate transactionsMarket distortions when agents are better informed: The value of information in real estate transactions
www.mitpressjournals.org [PDF]
… Furthermore, REO properties sold by GSE are far less likely to sell to investors than REO properties owned by other real estate institutions … homeownership and neighborhood stability over other REO holders, who may be more interested in disbursing an REO property as fast …

The impact of unconventional monetary policy on real estate marketsThe impact of unconventional monetary policy on real estate markets
papers.ssrn.com [PDF]
… Furthermore, REO properties sold by GSE are far less likely to sell to investors than REO properties owned by other real estate institutions … homeownership and neighborhood stability over other REO holders, who may be more interested in disbursing an REO property as fast …



Q&A About Real Estate Owned (REO)


What does the REO specialist do?

The REO specialist markets, reviews offers, prepares reports on status of properties in portfolio and tracks down deeds.

Who negotiates commissions with the agent who brings offers to the bank's attention?

The bank's Reo Specialist negotiates commissions with agents who bring offers to his attention.

How does an agent list a property in the MLS?

Through multiple listing services (MLS).

Are there other ways for banks to sell their foreclosed homes besides as-is?

Yes, there are other ways.

Why would a homebuyer choose to have her ideal home inspected before making an offer on it if she knows that it is an as-is sale?

She wants to know what problems might be hidden from view before committing herself financially.

Who manages REO properties?

The bank's REO specialist manages REO properties.

What is the name given to foreclosed-upon real estate?

Real estate owned.

What happens when a buyer makes an offer on a property but doesn't close escrow within 30 days of accepting terms of contract from seller or lender after inspection period has expired or contingency has been removed by buyer or lender at buyers request ?

If no closing occurs within thirty days after acceptance of terms by buyer, then contract becomes null and void .

How does the REO specialist help banks liquidate their properties quickly and efficiently?

By giving them wide exposure through local real estate agents.

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