Home Buying in Edmond>Question Details

Why Me, Home Buyer in Oklahoma

What does REO mean?

Asked by Why Me, Oklahoma Wed Feb 25, 2009

If you buy a house from a bank REO, does this mean you have to pay what the bank is asking?

Help the community by answering this question:


Reo is an abbreviation for Real Estate Owned. Typically refers to real estate owned by a corporation acquired through foreclosure, employee relocation package, etc. You are typically negotiating with the ultimate decision maker and can therefore come to terms and create a binding accepted offer free of additional contigencies required in short sales. http://reohomes.org/

Most reo sales require fast closing and will usually not accept sale of home contigencies.Typically will need a pre approval letter or proof of funds at time you make the offer.
3 votes Thank Flag Link Wed Jun 10, 2015
REO is an acronym for Real Estate Owned. The acronym can have applications to real estate other than distressed properties. The current attention given to our troubled housing market, has the term most widely used in current conversations about foreclosed properties owned by lenders. Most likely, this is the application of the definition is what you seek.

REO as a result of foreclosure: On a lender’s books, assets are defined by type. Once a property is foreclosed, and not sold at a sheriff sale, the lender becomes the owner. This piece of real estate is a non-performing asset for the bank, because lenders are in the finance/money market, not real estate ownership and management market. Lenders seek to sell non-performing assets and hire Realtors to market and sell these pieces of real estate. The lenders reference these properties as REO since that is how the asset is defined on their books. Subsequently, Realtors will reference properties for sale that are owned by banks as REO properties.

Not all REO’s are foreclosures: REO can refer to Real Estate Owned by an individual, LLC, or corporation. A loan officer may make a list titled REO when talking with a prospective borrower, because that is a list of “Real Estate Owned” by that person or entity.

The troubled housing market has much attention on lenders’ REO‘s, and that frequent discussion that we hear about everyday usually refers to Real Estate Owned by a lender as a result of a borrow defaulting on their loan which led to a foreclosure. You will also hear people refer to “Bank Owned” properties. The implication is the same for either term.

As it pertains to purchasing, your best strategy is to study the comps and construct your offer based upon the combination of the what the data supports and the value to you personally. Some banks employ an under pricing strategy, and it is very effective. A few individual sellers do this, but most are not courageous enough to do so. It really is effective, though. A bank might price a property very low with the expectation that the multiple bidders will drive the price up to the highest and best the market will currently bear. In that case, you, the buyer, may pay over the list price, but still secure a great deal. This is particularly true for bank owned properties, because the marketing exposure is often very limited. The end result of a price secured in a sale of real property comes from a result of both the asking price and market exposure. If the price is low, but few people know about it, the market cannot push it upwards. If the price is high, and the property is extensively promoted, the market dismisses it. You must have both, right pricing and market exposure, in order to gain the highest and best price.

For you, as a buyer, you might buy a bank owned property (REO), pay over ask price, and still have secured the purchase under market value. If the bank, through their representative, did not provide strong marketing exposure for the property, enough bidders were not there to push up the value. That would be good for you, if you were the successful buyer. Another bank may ask way over market value, and in that case, you, as a buyer, should not hesitate to offer way less than ask price.

Bottom line. Study the comps, evaluate the worth to you personally, and make your offer based upon that. That applies to all real estate offers, REO or not.

Deborah Madey - Broker
Peninsula Realty Group
732 530-6350 Direct
2 votes Thank Flag Link Thu Feb 26, 2009
Deborah Madey, Real Estate Pro in ,
There are 3 steps in the "distressed sale" process: short sale, forclosure, REO.

REO - failed to sell in foreclosure, now owned by the bank. Here in NJ, then given to a local realtor to publish on the local MLS to sell at or near market value.

Francesca Patrizio, Realtor Associate
Web Reference: http://www.PatrizioRE.com
1 vote Thank Flag Link Wed Feb 25, 2009
Just like any other home, an offer can be made at any price. The listing price is just what they would prefer to get for the home. Talk with your Real Estate Agent and have them check the comps for the area to make an educated offer.

Good luck.
0 votes Thank Flag Link Wed Jul 8, 2015
Typically, Real Estate Owned.
0 votes Thank Flag Link Sat Jun 13, 2015
Real estate owned or REO is a class of property owned by a lender—typically a bank, government agency, or government loan insurer—after an unsuccessful sale at a foreclosure auction. A foreclosing beneficiary will typically set the opening bid at a foreclosure auction for at least the outstanding loan amount.
0 votes Thank Flag Link Tue Feb 25, 2014
REO stands for Real Estate Owned. I joke around with people and tell them that they forgot the "P" in REPO. There use to be a time when you could get these properties for cheap, but now the banks are looking to recover more money on these REO properties. Also keep in mind it depends on what condition the property is in whether or not you can get a loan on it. I showed a couple a house on Sunday that was an REO and called a friend who is a loan officer on Monday and told him about the property and was told there was no way they could get financing on that property due to the condition of it.
0 votes Thank Flag Link Thu Feb 26, 2009
This should help you - read the blog posts.
0 votes Thank Flag Link Thu Feb 26, 2009
REO stands for Real Estate Owned. While the banks would certainly like to receive the full asking price they are negotiable as are most sellers in our current market. However, it isn't likely that you'll be getting a fantastic steal as they have their bottom line and 9 times out of 10 they tend to stick to it pretty tightly. That isn't to say there are great deals out there. Your best best is to hire a Realtor to help you sort thru it all. It can be a very overwhelming process to go at alone. Best of all, a buyers Realtor is a free service to you. They are normally paid by the seller which is all the more reason to have your own representative!
0 votes Thank Flag Link Wed Feb 25, 2009
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