Chicago Real Estate

What to Know About REO

Real Estate Owned or REO also commonly referred to as “bank owned”, is recognized as homes that have been foreclosed on by lenders or banks. 

A home can enter a state of foreclose for many reasons however, it’s usually due to the event when a borrower’s mortgage payments become delinquent and ultimately goes unpaid.  The home then enters the position of pre-foreclosure.  In this state, the home can either undergo a public auction or be sold in a short sale.  In a short sale, the owner sells the home for a significantly lower value in comparison to the required mortgage amount.  The legalities of each step and its processes can vary by state due to varying forms of legislature.  In the event that neither a public auction nor a short sale is conducted, the home is then occupied by the mortgage lender.  In most cases, this is a bank.

Properties listed as Real Estate Owned are interchangeably used with the term bank owned on account of which route the lender chooses to take in when the home is now in their control.  If the lender decides to seek the aid of a real estate agent to sell the property, it’s considered REO.  However, when the lender is a bank, the property can list on the market directly from the company’s network database.

Whether the foreclosed home is purchased at an auction or as REO, the closing price is most than likely to be at a significantly lower rate than market value.  However, it’s important to note that these properties are usually in a depraved state.  This means that it will need to undergo many repairs and changes to ensure it has adequate living conditions.  Ultimately, the rules and regulations associated with REO properties can vary all throughout the country.