REO

What is an REO property?

The most common definition of an REO (Real Estate Owned) is a property that has gone into foreclosure and didn’t sell via short sale or auction. If the foreclosed home doesn’t sell, the ownership defaults to the original bank or lender.

REO properties are listed in the Multiple Listing Service the same as traditional sales. The lender may hold the home for a while if there aren’t any REO buyers on the market or if it is in poor shape. You may get the house at a discounted price, but the contract and purchase procedure has additional consideration than buying a traditional home. You’ll likely see these differences during negotiations and financing.

Advantages and disadvantages of buying an REO property

The main advantages of buying an REO property is the lender is motivated to sell, REOs are priced competitively– there’s a better chance that you’ll get the house at a discount.

The main disadvantages of buying an REO property are that the house is usually a fixer-upper, meaning more time, energy, effort and money are required to make the space livable. The house is typically sold as is, so if any damage is on the buyer to repair after closing. Lenders seldom give additional concessions or credits during escrow.

How to finance an REO property

Cash is not required to purchase an REO property as it is at an auction. Financing an REO property is similar to the way you would finance a regular home purchase — with a mortgage. Your lender can provide specific loan programs details for you but unless the property is uninhabitable it can be financed with conventional mortgage, FHA, FHA rehab, VA renovation, and hard Money (private) loans.

Many potential home buyers are unaware of REO properties or may be intimidated by the idea of buying a home that previously faced foreclosure. With a proper amount of research, finding an REO property may be worth the discounted price. Paired with flexible financing options, looking into REO properties may be worth the extra effort.

Our Company

The Advantage Real Estate Group is a Certified Short Sale Expert (CSSE) real estate brokerage focused on helping homeowners navigate a difficult situation with skill and compassion. ARG is experienced with traditional, distressed, bank-owned (REO), investment, and value-add property sales. For over 24 years we have worked with all homeowners to find the best solution that preserves their options and protects their future.