Real Estate Owned (REO)
What it is:
How it works (Example):
Let's say John Doe falls behind on his house payments, and his, Bank XYZ, forecloses on the house. Bank XYZ doesn't want to be in the business, so it the house up for for the amount of the ($400,000), but because the house is really only worth about $275,000, nobody buy it.
The house is a REO because the bank owns it.
Why it Matters:
REOs often are less expensive than similar properties, but they often need remodeling or other real estate investors are attracted to REOs.. Banks do not want to be in the business, so when they have REOs on their hands, they often do what they can to sell the property and recover at least some portion of the amount. This might involve paying off tax liens or other associated with the property, and they might list them for below , which is why some