Greenway Properties

REO – Real Estate Owned (by the bank)

What is an REO?

REO’s are properties that have gone through the foreclosure process, gone to a trustee’s sale (auction), nobody bought then at auction so they have been returned to the bank that held the loan in first position. That bank then processes the home, prices the home and hires a Realtro to market the home for sale on the appropriate MLS or multiple listing service that Realtors use to search for available properties for you.

How does an REO sale differ from a standard sale?

In most ways an REO sale doesn’t differ much from a traditional sale. You write an offer to a seller, who in this case happens to be a bank not a home owner, they respond to your offer and if both parties can agree on the terms we go into escrow. Unlike a short sale that can take four to six months to complete an REO can be done in a standard escrow timeline of 30-45 days. The escrow time line is primarily dictated by the time it takes your bank or mortgage broker to process your loan which used to be 30 days but more often than not due to new loan regulations it is taking 45 days to get your loan done.

Where an REO differs significantly from a standard sale is in addenda to the contract and disclosures. The standard contract to purchase a home is about 14-15 pages total. On an REO the bank is going to add another 8-16 pages in the form of an addendum that adds their own terms and language to the contract. Once we receive that addendum from the bank we will go through it with you line by line and make sure you understand and are comfortable with the banks terms.

When it comes time for you to review the disclosures for the home most of them will be blank and marked “REO EXEMPT”. This is because the bank has never lived in the property and in most cases never even seen the property so they no nothing about the home so their burden of disclosure is much less than a seller who has lived in the home for several years. For this reason most of what you know about an REO home you will find out through inspections by profesional home inspectors.

Why is buying an REO attractive to me?

Buying an REO is attractive because they are most often listed at a below market rate price. Statistics for El Dorado County have shown short sales selling for as much as 22% less than standard sales. So if you are willing to deal with a little added hassle of the banks terms and a little less certainty due to a lack of history or disclosures on the home you can get a home for below market rate.

How do I find REO properties?

Click here: REO list to get a free list of REO properties – when you fill out the form be sure to put the words “REO list” in the comments section.