WHAT IS AN REO PROPERTY

As soon as a property goes into a distressed status (the borrower/home owner misses mortgage payments) the bank will want to determine the amount of equity that the property has. A popular method to determine the equity is to obtain a Broker Price Opinion (BPO) or order an appraisal. Based on the amount of equity that is determined from the BPO, the bank will decide whether to try for a short sale or to allow it to go through the foreclosure process. If the bank is unable to sell the property through a short sale or at a foreclosure auction it will now become an REO property.

After a repossession from which the property becomes classified as REO, the bank will go through the process of trying to sell the property on its own or obtain the service of an REO Asset Manager. The bank will remove some of the liens and other expenses on the home and try to resell it to the public, either through future auctions or direct marketing through a real estate broker. The asset manager will also try to contact REO realtors that specialize in certain zip codes to help sell this bank owned property. Bank REO properties are generally in poor repair and maintenance. Real estate investors will often purchase these properties, as banks are not in the business of owning homes and the low price may compensate for the condition of the property.

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