What is a "real estate owned" (REO) property?

A "real estate owned" (REO) property refers specifically to properties that have been foreclosed upon and are now owned by the lender, typically a bank or mortgage company. After a borrower defaults on their mortgage and the property goes through the foreclosure process, the lender takes possession of the property. These properties are then classified as REO and are usually listed for sale in the real estate market.

This designation is significant in understanding how properties transition from owner-occupied or investment properties to lender-owned assets through foreclosure. REO properties often represent opportunities for buyers, as they may be sold at a discounted price. Furthermore, these properties may need repairs or renovations since they have usually been vacated.

In contrast, properties being rented out are still owned by their private owners and do not fall under the definition of REO. Similarly, properties currently listed for auction or on the market for sale may not necessarily be lender-owned and could still belong to private individuals or investors. Thus, the definition is distinct and crucial for understanding the implications of ownership following foreclosure.