GLOSSARY — REAL ESTATE TERMS
REO / Foreclosure
An REO (Real Estate Owned) property is a home that has completed the foreclosure process and reverted to lender ownership, typically sold as-is and directly by the bank rather than through a traditional seller.
REO vs. short sale
A short sale involves a homeowner still in title working with their lender to sell for less than owed. An REO property has already completed foreclosure -- the lender now owns it outright and sells it directly, without a prior homeowner in the process.
What to expect buying an REO property
REO properties are sold strictly as-is, often with minimal seller disclosure since the bank typically has no firsthand knowledge of the property's history. Buyers should budget for potential deferred maintenance and expect a more rigid, less negotiable transaction process than with a traditional seller.
WHAT TO DO WHEN BUYING AN REO PROPERTY
- Budget extra for potential deferred maintenance beyond what's visible
- Get a thorough inspection given limited or no seller disclosure history
- Confirm your loan program's property condition requirements before offering
- Expect a more rigid negotiation process than with a traditional individual seller
Do banks negotiate on REO property prices?
Some flexibility exists, but banks generally price REO properties close to market value and negotiate less on terms than an individual seller might.
Are disclosures required on an REO sale?
Disclosure requirements can differ for bank-owned properties, and banks often have limited firsthand knowledge to disclose -- an inspection becomes even more important as a result.
Can I get an FHA or VA loan on an REO property?
Often yes, though the property must still meet the loan program's minimum property standards, which can be a challenge on a foreclosure with deferred maintenance.