If a property for sale is an REO property, what does that mean?
REO stands for Real Estate Owned. The full technical term is Other Real Estate Owned, but OREO is already commonly identified as a cookie.
REO generally means that the property in question has been repossessed. For any number of reasons, the previous owner could not make the payments and the lending agency went through the proper channels to take the property back.
The proper channels vary from place to place. In Massachusetts, there two processes by which a home or other property is repossessed: a judicial way and a non-judicial way. In the non-judicial version, the mortgage lender has to publish their intent in a local newspaper. Both ways mean that the borrower will be served notice of foreclosure by the lender. Whichever process was used, the lending institution will then try to auction off the property.
The auctions will be public, which means anyone can bid on them. The mortgage lender normally sets the auction price at the amount of the outstanding loan that the previous owner defaulted on. Sometimes the amount owed is more than the house is worth. If no one wants to buy it, the mortgage lender takes it back and lists it on its books as REO. That means it is a non-performing asset. The institution that took the property will then try to sell it.
Due to the nature of real estate repossession and the length of time these properties can stay empty, sales can become quite complicated. It would be wise to employ real estate closing services to help evaluate whether a property is a good deal, and to help navigate the buying process. OneBoston Title’s team is well-experienced in REOs. We will gladly help you in your transactions and other Boston foreclosure services.