Definition of REO Homes
A real estate owned (REO) home is one that is owned by a lending institution as a result of forfeiture or failure to make mortgage payments. REO homes are popular with investors and home buyers looking for a deal.
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Identification
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When a homeowner defaults on a mortgage loan, the property ends up at a foreclosure sale. During this process the lender attempts to cover its losses by selling the property to the highest bidder. If the lender's minimum bid requirements are not met, ownership of the home is transferred to the bank and it becomes classified as real estate owned.
Buying an REO Home
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It is a myth that REO property sales prices are deeply discounted. However, buyers can still purchase an REO home at below market value if they perform their due diligence. Review comparable sales and property history before submitting an offer.
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Warning
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REO properties are sold in as-is condition and may be in disrepair. According to RealEstateABC.com, "your offer should include an inspection contingency period that allows you to terminate the sale if the inspections reveal unanticipated damages that the bank will not correct."
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References
- Photo Credit old house image by Tom Oliveira from Fotolia.com
