REO: Real Estate Owned

What is an REO? An R.E.O. is any property acquired by a lending agency, ususally a bank, if the property has failed to sell at a foreclosure auction. This happens often if the properties up for sale at these auctions are worth less than the total amount owed to the bank. The minimum bid at a foreclosure auction is ususally equal to the amount of the outstanding loan plus accrued interest and any fees associated with the foreclosure sale.

If the bank does not sell the foreclosure at the auction, it will then go through the process of trying to sell the property on its own. In an effort to make the property more appealing to buyers, the bank will try to remove some of the liens and fix any apparent problems then try to sell the property. Real estate investors often market foreclosed properties if the banks don't have any interest in keeping them because they can sell them for a discount compared to the market values for similar non-foreclosed homes.