Real Estate Owned

Real Estate Owned Properties (REO’s)

When the lender is either the successful bidder or there are no bids at all during an auction, the bank becomes the legal property owner. When ownership is transferred to the bank as a result of foreclosure, the property is often referred to as either REO or Bank Owned property. At this point, banks typically are not in the business of managing real estate, nor do they want to be, that’s why banks are so eager to sell their real estate inventory.

Bank Owned Opportunities:

  • Banks want to sell their REO inventory as quickly as possible.  The top three reasons why are discussed below:
  • Unprofitable Assets: Banks are primarily in the business of lending money and have little interest in diverting their resources toward managing the disposition of real property. However, even though they are anxious to dispose of their REO inventory, this does not mean that banks want to lose money in the sale process.
  • Carrying Costs: As soon as ownership of the property reverts back to the bank, the expenses of holding the property quickly begin to accrue. These costs include property taxes, maintenance expenses and insurance premiums. In most cases, the longer a bank holds a property the more unprofitable it becomes.
  • Property Damage: Since most REO properties are vacant, there is always risk of property damage from vandals and/or bad weather. The problem grows with every additional REO property added to banks non-performing asset portfolio. Again, this creates additional incentive for a bank to quickly move this property out of its possession.

There are positives and negatives when buying bank owned property.   


  • When buying directly from the lender, most REO properties are sold with a clean title, meaning that all encumbrances on the property are resolved.  There is no redemption period or unknown judgments.
  • In today’s market, there is typically an abundance of bank owned properties in our area which creates an opportunity to identify good deals. However, this does not mean it is  easy to find below market REO.
  • The fact that they are a lending institution gives them the flexibility to be creative and negotiate the terms and conditions of the loan.


  • A disadvantage could be that most properties have clear title and this fact will attract more buyers, creating added competition for a given property. As the competition increases, the selling price is driven up resulting in lower profitability in the deal.

Closing the Deal:

You will probably encounter a lot of competition in your search to find a great deal on a bank owned home. Search our website and call for more information regarding the purchase process. Establish a relationship with one of our sales associates. This relationship can provide just the edge you need against another qualified buyer.

Your agent will present your offer with all the required documents to give you every opportunity to purchase the home. While lenders are eager to sell their REO property, they also want to ensure that the property does not return to their inventory. By highlighting your buying position and providing all recommended documentation, the banks will strongly consider your offer. Cash offers are given more priority.