What does "real estate owned" (REO) mean?

The term "real estate owned" (REO) refers specifically to property that is owned by a lender after the foreclosure process has been completed. When a homeowner is unable to meet their mortgage obligations, the lender has the right to foreclose on the property. Once the property is foreclosed, it typically goes to auction, but if it does not sell at the auction, it becomes the property of the lender, often a bank or financial institution. At this point, the property is classified as REO.

This designation is significant because it indicates that the lender may now take steps to sell the property, often at a lower price than the original mortgage balance, in order to recover some of their losses. REO properties can sometimes present opportunities for buyers looking for discounted real estate, but they may also come with additional considerations such as the condition of the property and the potential for liens or other encumbrances.

The other options do not accurately reflect the definition of REO. For example, property owned by a buyer after purchase does not involve the lender’s ownership or foreclosure aspect. Similarly, property sold by the government and property currently listed for sale do not specifically describe the lender’s ownership status post-foreclosure. Understanding the concept of REO