Posted by: Todd Long | March 26, 2008

What is an REO?

REO stands for Real Estate Owned.  Does that really help?  Probably not so let’s investigate further.  REO is a term that describes the property owned by a bank who has foreclosed on a home owner.  That property is in Real Estate Owned by the bank.

Here is how the process works.  A homeowner gets behind on his or her payments for whatever reason and the lender sends them a  letter.  This letter will detail that the lender plans to foreclose (take back) the property which is their right as detailed in the Deed Of Trust that was signed at closing.  Then the bank starts the foreclosure proceedings which ends with the property being sold at the court house steps.  The foreclosing bank sets the Opening Bid for the auction at the court house steps which in most cases is the amount they are owed plus any back interest, borrower fees, and attorney fees.  The bidding is opened, literally on the court house steps in Iredell County and anyone can bid on the property that is present.  In Iredell County it has been my experience that most auctions at the court house steps end with the bank owning the property.  It then becomes an REO Property for the bank.

 Well as you might imagine banks are not in the property ownership business.  They are in the property lending business!  To add to this if they own to much REO they are limited on the amount  of money the can lend.  So they have a real interest in getting rid of REO properties.  In our area the bank will typically start this process by contacting a Appraiser to do an appraisal and a Real Estate agent to do a BPO.  Yes more lingo.  BPO stands for Broker Price Opinion.  Then the lender will set the list price for the property.  Usually this list price is within a few thousand dollars of the auction price they paid.  There is a reason for this that I would be happy to explain  if you would like to contact me.

Typically they will list it with the agent that did the BPO for them and will lower it by about $5,000 every 30-45 days until it sells.  Again, they WANT to sell this REO and get it out of their inventory so they can get back to their real business which is making loans.

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  1. […] What Is An REO?REO stands for Real Estate Owned. Does that really help? Probably not so let’s investigate further. REO is a term that describes the property owned by a bank who has foreclosed on a home owner. Here is how the process works. more […]


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