Is “REO” and “Foreclosure” the Same Thing?

by seacoast_ashley 26. January 2014 06:42

If you’ve been looking at listings online, you may have come across the abbreviation REO, which stands for Real Estate Owned [by a bank, credit union, etc.]. This is often used in connection with foreclosures. So, you may be wondering if an REO and foreclosure are the same. When searching for homes to buy, the simple answer is “yes”. They sell under basically the same conditions.

Foreclosures are properties (homes or pieces of land) that are currently going through a Coldwell Banker Foreclosure REOlegal process in which the lender has taken over control after the borrower did not make payments. At this stage, the lender tries to sell the home (or land) to recoup their losses. This can be done through an auction or traditional listing in the local MLS. Either way, the foreclosure process reaches its final stage when 1) the home sells and becomes the responsibility of that new owner or 2) the home fails to sell, becomes an REO, and is the lender’s full responsibility. So, basically, an REO is a home in the final stage of foreclosure.

Banks, credit unions, etc. are not in the business of being landlords and having a property on the books can look like mismanagement to shareholders, so they are usually very motivated to sell. That’s why foreclosures are often listed at the lowest price in the neighborhood or in comparison to similar homes.

Conditions of foreclosures vary from good to rundown and existing damages may or may not be repaired by the lender before the home goes on the market. Foreclosures sell “as-is”, so a low price doesn’t guarantee a good deal. They may need some work and aren’t always the best option for buyers who need something move-in ready. Of course, it’s a case-by-case or house-by-house scenario.

If you’d like to know more about foreclosures and REOs, ask your Sea Coast agent. If you don’t have an agent, find one now.

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