| For the novice real estate person, the terminology | | | | REOs are often grouped together as a lot of homes. |
| surrounding real estate and real estate investing can | | | | These homes are marketed toward investors as high |
| be difficult to understand at best. Real estate agents | | | | price cuts. The lender is willing to go very low on the |
| spend many years studying these terms and words. | | | | loan or even lose money on the deal if the investor is |
| When trying to better understand real estate, the term | | | | willing to buy up several properties at once from the |
| REO may come up. An REO refers to a bank owned | | | | lender. The lender reduces the price of the homes by |
| piece of real estate but can be a bit more complicated | | | | removing any liens and fees associated with the |
| than that. | | | | pending mortgage. |
| An REO stands for real estate owned. An REO is | | | | REO real estate is often in mediocre to poor condition |
| more than a single home; it is a group of homes | | | | and investors pick up the properties often in hopes of |
| owned by a bank or a lending institution. After a home | | | | remodeling and reselling or renting to regain the money |
| is foreclosed upon, the bank has two options for selling | | | | spent on the properties. Investors have a higher |
| that piece of property. The first option includes listing | | | | chance of turning a profit, because the nature of |
| the property on the market, with the tag "bank owned". | | | | investing is time. Banks, on the other hand, have no |
| This will often tell the potential buyer that the lender is | | | | time to hold on to the home and no means through |
| in dire straights and ready to sell the home in a very | | | | which to modify the home for a quicker sale. Investors, |
| short time. If this tactic does not work, the bank will | | | | on the other hand, are happy to lift the property from |
| move the home into auction status and attempt to sell | | | | the bank at the heavy discounts being offered. |
| the home at auction to the highest bidder. | | | | Real estate REO sales are rarely, if ever purchased |
| Unfortunately, for some properties, even an auction will | | | | by individuals. Once a property enters REO status, the |
| not bring enough money to the lender to agree on the | | | | bank just wants to get rid of the property as quickly |
| sale of the home. This leaves the lender in a tight | | | | as possible and is often only willing to sell to a cash |
| situation. Banks are not in the business of real estate. | | | | buyer like a real estate investor or large company. On |
| The longer they hold on to that unsold home, the longer | | | | rare occasions, the banks will be willing to sell a home |
| they are not getting money back for that property. It is | | | | or two off of a larger lot if the buyer has an approval |
| during these cases that a bank or lending institution will | | | | from another lender ready for the deal upon the |
| turn the home to REO status. | | | | introduction of the sale contract. |