Every REO was at one point owned by an individual or an entity other than the bank.
The owner was likely unable to make the mortgage payment and so went into default. (At this point many people decide to pursue a short sale in order to avoid foreclosure.)
After the owner misses several payments (how many depends on the lender), the property is offered at auction. If the property does not sell, the bank takes possession of the property and assigns it to an asset manager. At this point the property is considered a – BANK OWNED OR REAL ESTATE OWNED (REO) ASSET.
Check Out My Related Training Video: How To Buy Bank Owned Properties
The asset manager typically works directly with the REO Broker, a Realtor who special- izes in foreclosures. The REO Broker lists the property and makes it available to the general public, including investors.
Curious about another Investing Term? Here is a quick definition list of 32 Important Real Estate Investing Terms that will help take your investing to the next level and get you closing your next deal quickly.