What is a REO Property?

Real estate ownedor REOis a term used to describe a class of propertyowned by a lender. This often used phrase has become part of realtors and real estate investors regular vocabulary.  Typically real estate becomes lender owned by virtue of the conclusion of foreclosure litigation instituted by the lender against the homeowner/borrower.  If the lender successfully proves it is entitled to foreclose as a result of loan default, whether through litigation motion practice, i.e., a Motion for Summary Judgment, or at the time of a trial before a Circuit Court Judge, a final judgment of foreclosure is entered.  This final judgment reflects the total amount owed to the lender, inclusive of the principal balance of the loan, past due interest, attorneys fees, and other costs incurred.  The judgment also references a foreclosure sale date, which may range from a few weeks to several months from the date of the judgment.  At the time of the foreclosure sale, an online bidding process occurs with the Clerk of Court open to the general public.  The plaintiff lender is usually the high bidder at the foreclosure sale because that entity is granted an automatic credit bid up to the dollar amount set forth in the final judgment.  No sooner than ten days after the foreclosure sale, the Clerk of Court will issue Certificate of Title in the name of the high bidder which is evidence of new ownership of the foreclosed property.  Once Certificate of Title is issued to the Lender, save the existence of an appeal being filed by a party in the foreclosure litigation, the lender can then market and ultimately sell the foreclosed property as an REO.