These days everyone knows that REO means Real Estate Owned. We see the properties in real estate comps, on websites, or at a court auction. Some time ago, we called them bank repos, or bank repossessions. The basic overview is, a homeowner did not pay their mortgage, and after a foreclosure process, is evicted and the home is placed for auction, or short sale, sometimes both.
It goes without saying that if the previous owner could not maintain the mortgage, that taxes, HOA dues, and general maintenance will fall behind. It is the new owners responsibility to catch things up. This can be a tedious process; many times banks will sell the REO property as a ‘quit claim deed’ at time of sale. What this means is the bank will just sell you the property ‘as is’, with any remaining liens or legal issues. Generally, the first & second mortgage has been cleared, but of course you will want to verify the actual status to be sure.
REO or Real Estate Owned properties are certainly worth a look. Join me next time as we continue our discussion of REO deals and the potential they offer.