What are REO homes?
Real Estate Owned (REO) properties are foreclosed houses that are now in possession of the bank. A borrower fails to make payments on their mortgage loan, the bank sent out a notice of default, a notice of trustees sale, and the house was placed at a public auction. Because the property had insufficient equity, it was not worthwhile for any real estate investors to purchase the house at the public auction. The bank sets the starting bid, usually at the amount owed. Since nobody bought it, they take title of the house and it becomes a Real Estate Owned property. Banks are in the business of lending, not in owning homes. They do not want to be landlords or Realtors, and therefore want to get rid of the property with the smallest possible loss. The carrying costs of owning thousands of houses without a borrower making a monthly mortgage payment add up. Banks want to get rid of these properties and so they sell them as REO Homes. REO homes are usually sold below market value. The lenders w
