The Definition of "REO"
Properties
You will hear people saying "REO" in one form or another including
"REO's" and "REO Properties" among a few others. REO simply
means Real Estate Owned. In the real estate investment industry when you see
the words REO in an advertisement it is generally assumed the subject property
is a foreclosed property or property that has otherwise come into the possession
of the bank or lender.
Where it gets confusing to some is that REO does not only mean real estate owned
by a bank or lender they have accepted in lieu of foreclosure or have foreclosed
upon but the term also indicates any property held by an individual including
their primary residence.
When a loan originator is accepting an application from a prospective borrower there is actually a section for the listing of real estate owned. When that part of the application is encountered the loan originator may use the abbreviation REO instead of saying the words "real estate owned". This is the time where all properties are listed whether or not there is a registered mortgage attached to them.
The Definition of "FORECLOSURE" Properties or "BANK OWNED"
Legal process by which a
lender cancels (forecloses) a borrower's right of redemption of the mortgaged
property through a court order (called foreclosure order).
The court sets a date up to which the borrower can redeem the property by paying
off the entire loan balance (including foreclosing expenses).
Thereafter, the lender is free to sell the property and, upon the sale, applies
the sale proceeds first to the due amount and pays the remainder (if any) to
the borrower. The borrower remains liable for the due amount if the property
remains unsold, and for the shortfall if the sale proceeds are insufficient
to pay off the entire debt. The lender is generally under an obligation to sell
the property at or near its fair market value (FMV).
For a more detailed explanation call: 805 929-8491