What Does Real Estate Owned Mean?

Real estate owned (REO) is the name given to foreclosed-upon real estate, such as detached houses, condominiums, townhomes, and land, in a lender's portfolio. Such properties end up in lender portfolios after unsuccessful sales at foreclosure auctions.  The servicer, lender, or quasi-governmental entity (such as Fannie Mae or Freddie Mac) takes ownership of a foreclosed property when no bidder offers the amount it seeks to cover the loan.

Understanding Real Estate Owned (REO)

When a borrower defaults on his mortgage, the pre-foreclosure period often involves either a real estate sale, loss mitigation option,  or a trustee sale.  If nothing goes through, the foreclosure process can end with the servicer, lender, or bank, taking ownership of the property. Banks may attempt to sell real estate-owned properties in their portfolios without the help of real estate agents. Oftentimes when this is the case, banks list their REO properties online, making many REO listings readily available on bank websites. A bank's loan officers may also notify customers looking for homes about the REO properties in its portfolio.

REO properties can be attractive to real estate investors because banks may, in some cases, sell them at a discount to their market value since selling such properties is not typically their primary business line.

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