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 want to get rid of them quickly and don't want to worry about getting them in tip top selling shape. Lenders usually sell their REO properties "as is" and without warranties, meaning they are not going to guarantee that the plumbing, heating, cooling, water heater, sprinklers, etc. are in good working order. Most, but not all REO properties have been beat up pretty badly. Owners of homes in default usually want to "stick it to the bank" and so do as little as possible to place the home in selling shape. Many times they'll even go out of their way to trash the house, putting holes in the walls, destroying things, and removing dishwashers, ranges, microwaves, and other real property that may have value. Because lenders want to get rid of properties quickly, they nearly always list the property with a real estate broker. Each city usually has select agents that specialize in REO properties. These properties end up on the local Multiple Listing Services. Here we are to help you out with all your REO needs!