Understanding Real Estate Owned or REO's—Bank Owned Properties

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Bank Foreclosed Property:

Bank of America/Countrywide RE0

Citibank REO

Freddie Mac REO

Fifth Third Bank REO

Fannie Mae REO-- Homepath

HUD REO

Ocwen Financial REO

RealtyTrac

Regions Bank Properties

Truist REO

Wachovia REO-Wells Fargo REO

What are REO’s or Real Estate Owned?

Many consumers have asked the above question—as REO’s or Real Estate Owned by mortgage lenders such as banks or mortgage companies are rarely understood by those outside of the real estate or mortgage industry or those who operate in the buying or selling of homes on a regular basis.

If you want to search for REO's in your area—be sure to scroll to the bottom of this page...

REO or Real Estate Owned is property owned by a mortgage lender, government agency, or government loan insurer—after an unsuccessful sale at an auction.



A foreclosing will typically occur where those representing the lender will set the opening bid at a foreclosure auction for at least the outstanding loan amount and if there are no bidders that are interested the lender will legally repossess the property.

This usually occurs when the amount owed on the home is higher than the current market value of the foreclosed property and bidders who are savvy stay away or don’t make an offer on the auctioned property.

Once the lender repossesses the property it is listed on their books as REO (Other Real Estate Owned) and goes into their inventory as property that they own (non-performing asset or a non-income producing asset).

REO or Real Estate Owned gets its name from “Other Real Estate Owned” that banks traditionally had on their books that were not a part of their “performing assets.”

Reputable mortgage lenders are primarily in the business of making loans to consumers with the intent that the  loans will be repaid in full by the consumer—with interest.

They are not in business to seize, manage and resell property of those who have defaulted on unpaid loan balances.  In other words it is not their core mission—however, some are becoming efficient in the process due to the mortgage market meltdown over the last several years.

How It Works:

After a homeowner falls behind on their mortgage payments and the property goes into a distressed status the lender will normally want to determine the amount of equity that the property has.

They will on many cases use a Broker’s Price Opinion (BPO) or order an appraisal.   Based on the amount of equity that is determined from the Broker Price Opinion the bank will often allow a short sale (if requested by the distressed homeowner).

If a short sale is not requested by the home owner, the lender will continue the foreclosure process.  If the owner is unable to sell the property through a short sale the lender will foreclose and attempt to sell the property at a foreclosure auction.

If the sale is unsuccessful at the foreclosure auction it will become a REO (Real Estate Owned) property of the lender.

What Happens after the Property is Classified By the Lender as a REO?

The lender will go through the process of trying to sell the property with the assistance of a real estate broker or the service of a REO Asset Manager in almost all cases.

 
The lender will remove the liens and other debts on the home and try to resell it to the public.  It is not uncommon for them to utilize future auctions, direct marketing through a real estate broker, or sell the property themselves.

Protecting the Property

Many REO properties are generally in poor condition and need repairs and maintenance, both to satisfy property upkeep of local ordinances and to preserve and prepare the property prior to the property going on the market for sale. 


For those who are ready, willing and able—"investment properties" such as REO's can be a great investment.

How to Make an Offer

Before making an offer, have your real estate agent contact the the listing agent and ask the following questions:

• Are there any inspection reports that are currently available?

• Will the bank do any repairs?

• Is the property sold "as is"  and is it firm?

• What is the time frame for the acceptance of the offer?

• How will your agent deliver the offer to the bank or listing agent—and what is their normal response time?
  
  
  

Always realize that offers are usually "faxed"  or "emailed" to the bank. The listing agent would maintain your originals.

There are no  formal presentation when the offer is faxed and response from the bank may be slow.

Since there are no face-to-face presentation to the bank, it may be helpful to provide your real estate agent with a pre-qualification or pre-approval letter—and other credentials to show that you are serious in your offer to purchase.

Always remember that REO's normally sell at a price close to market value and sometimes well below if the property has been on the market for a number of months. 

In many cases the deals may not be what you expect—as the property is only slightly under the true market value.

Other Helpful Tips

•   A Cash offer is almost always superior to one that requires financing
  

•   Be Creative With Your Offer

•   Shorter Inspections work best with REO Offers

•  Time Your Offer—end of month—end of quarter—end of year—after holiday  etcetera

• Offer to Close Quickly
  

•  Make Below List Price Offers with a number of Banks

•  Make Sure You Have a Good Relationship with Buyer and Listing Agents

• Know Your Competition and Market

• Be sure to consider HOA (Home Owner Association), Appraisal and Title Issues

Always consider the overall buying process and be sure that you are properly prepared to meet the requirements of the lender.  The lenders listed below all have REO departments at their banks and they may have properties available in your area.

Bank of America REO

BB&T REO (Branch Bank and Trust)

BBVA REO

Citibank REO

Countrywide REO   

Fannie Mae REO

Fifth Third Bank REO

Freddie Mac REO

Homepath

HUD REO

M&T Bank: REO

RealtyTrac

Regions Bank Properties 

Truist REO

Taylor Bean REO

Other Sources for REO Property:

Auction FDIC

HUD Homes

RealtyTrac

Trulia

Zillow

Realty 1 Strategic Advisors

Other Helpful Tips

If your goal is to attain investment success on a consistent basis be sure that you do not invest in REO's on a whim—or in an inappropriate manner.

In addition, be sure to navigate our "Investment Page" in an effective and thorough manner.  Over the years we have seen many consumers invest in a haphazard and inappropriate manner and have major success.

We have seen many more invest in a haphazard or inappropriate manner and when financial difficulties and emergencies of various kinds occurred—they were not able to weather the storm!

As someone who is in total control of your decision-making—it is "you" who must decide the approach that you will take.

We are of the opinion that you will choose success at a high level and approach your investment decision in the right or more appropriate manner.

We wish you success in the future and we believe you will obtain just that by managing your credit and finances in a wise manner from this day forward!

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