What is a real-estate-owned home (REO)? – David Reecher
Short for “real estate owned,” REOs are foreclosed homes now owned by banks and lenders. Banks either withhold from releasing these properties on the market because they don’t want to take a loss, or they list them in the Multiple Listing Service (MLS) with a real estate agent. REOs are often priced below market value to create bidding wars among buyers.
REO properties can still be a great deal, but buyers should know that REOs may need repairs and banks will rarely cover these costs. When looking at purchasing an REO, buyers should get pre-approved with the bank that owns the property and try to put together the “cleanest” offer possible. Clean means few contingencies, a high earnest money deposit, and no requests to the bank to pay for closing costs.