REO Properties

REO properties are real estate properties owned by banks. REO properties are great investments for rehabbers. REO properties are usually fixers or fixer upper homes.

What does REO stand for?

REO stands for Real Estate Owned.

Do banks own REO properties?

If you are new at real estate investing, you will probably be surprised to find out that banks own real estate properties and that bank owned properties are called REO properties. When people think of buying houses, they often go to realtors or directly to homeowners via 'for sale by owner' ads. People rarely go to banks and ask bank officers what properties they have on their books. Imagine what your bank officer would say when you tell them; 'I'm looking for a house to buy - can you give me a list of all the real estate properties your bank owns?' The sad truth is most bankers don't even know REO properties exist. Most bank employees won't be able to direct you to the department that deals with REO properties.

How do banks come to own REO properties?

When a homeowner has defaulted on his or her mortgage payment(s) and no short sale negotiations or other solutions have been discussed, the bank will foreclose on the homeowner and the home. If nothing is done to stop the foreclosure process such as a mortgage short sale or other means, the home will go to trustees sales and sold to the highest bidder.

What is nobody bids high enough for the home?

If at the trustee's sale or sheriff's sale, no one bids high enough, the bank becomes the highest bidder and the bank ends up owning the real estate property. The property becomes an REO property because the bank owns it.

Do banks want to own REO properties?

Absolutely not! Banks are not in business to make money off real estates. Banks would prefer to lend homeowners money and get paid back in full the principal and interests. REO properties are liabilities to banks, not assets. Having a lot of REO properties on their books reflects badly on the bank's mortgage lending policies. What do you think the bank's shareholders think when they found out that the bank has been lending money to many people who cannot afford to pay back?