REO stands for “Real Estate Owned”. An REO property is one that has gone through the foreclosure process and was acquired by the foreclosing lender after that lender made at least a minimum bid on the property at a foreclosure sale. After the lender has title to the property, it classifies the parcel on its balance sheet as non-performing real estate owned by the lender.
Because the real estate is not generating income, most acquiring lenders will attempt to quickly dispose of the real estate either through an individual or bulk sale for less than fair market value. In most of these sale transactions, the selling lender will offer a low sale price to a buyer in exchange for generous contractual terms that favor the seller. An unsuspecting buyer might be surprised to find a lack of the common protections found in a non-distressed transaction. Because the selling lender must still deal with foreclosure law procedures, short sale transactions are unpredictable and can often take much longer than a regular transaction. The uncertainty of timing and unfavorable contractual terms mean that the bargain price of an REO transaction may not make an REO deal right for everyone.
Before purchasing an REO property, prospective buyers should assemble a team of real estate professionals, including a real estate broker, mortgage loan professional, and an experienced real estate attorney. At Reda | Ciprian | Magnone, LLC, we help REO buyers navigate the hazards of an REO transaction.
Short sale purchasers are invited to contact us (773-399-1122) to determine if we might be a match for an engagement to represent them in a short sale purchase.
