REO literally stands for Real Estate Owned. This means that it is a house or a property that is owned by a bank, usually after it has been unsuccessfully sold at a foreclosure auction. This is more common than not since the property values are often less than what is being asked for by the bank, with loan balances, interest, and fees, and so the property is then owned by the bank. It might be a lucky opportunity for investors, depending on the property. In some cases the REO may be a good investments, but not so in others. The most important thing is for the investors to do the research necessary to determine whether or not it is a good investment.

Often the bank that owns the REO is looking to get rid of the property as soon as possible. After all, it is not making them any money by not have people invest in it. But this does not mean the banks do not know what they are doing, often have entire departments dedicated to the handling of REOs.

It is a good chance to make money, if executed correctly. It is important to find out a few things: why was there a foreclosure, why were there no bidders in the original auction, and what is the condition of the property. Because REOs are sold “as is,” investors should look to inspect the site, even going as far to include an inspection contingency period in case of unexpected and undocumented damage.

Overall, REOs are a great opportunity. The investment is often less, sometimes up to 30% less, than the lowest foreclosure offers, but the difference may not be so great that caution should be thrown out the window. Do not be afraid to ask questions.