REO Property
Real Estate Owned — a bank-owned property acquired through foreclosure when it didn't sell at auction.
Definition
REO (Real Estate Owned) refers to properties that a lender (bank, credit union, or government entity) has acquired through the foreclosure process after the property failed to sell at the foreclosure auction. The lender becomes the owner and typically sells through standard retail channels.
Banks don't want to own properties — they're in the lending business, not real estate management. This often creates motivated seller dynamics: banks may be willing to sell at discounts, especially for properties in poor condition or when they have high REO inventories. However, banks are sophisticated sellers — don't assume a discount just because it's bank-owned.
REO properties are typically sold 'as-is' with limited disclosures, since the bank has never lived there and can't speak to condition. The title is usually clean (foreclosure extinguishes most junior liens), but inspections are still critical. Many great fixer-upper flips come from REO inventory.
Related Terms
Foreclosure
The legal process by which a lender repossesses a property when the borrower defaults on the loan.
Due Diligence
The investigation and verification process buyers conduct before committing to a real estate purchase.
Title
Legal ownership rights to a property — the bundle of rights that come with owning real estate.
Fix and Flip
Buying a distressed property, renovating it, then selling it quickly for a profit.
Off-Market Property
A property for sale that is not publicly listed on the MLS or major listing websites.