What is reo foreclosure mean?

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Reo foreclosure is a term commonly used in the real estate industry, but what does it actually mean? In this article, we will dive deeper into the topic of reo foreclosure, exploring its definition, process, and implications for both buyers and sellers.

Understanding Reo Foreclosure

Definition: REO stands for Real Estate Owned, and it refers to properties that have been foreclosed upon by a lender or a bank. When a homeowner fails to make mortgage payments, the lender can initiate foreclosure proceedings to recover the outstanding debt. If the property fails to sell at a foreclosure auction, it becomes an REO property, owned by the lender.

The Foreclosure Process: Foreclosure is a legal process that allows a lender to take ownership of a property when the borrower defaults on their mortgage payments. The process typically involves several stages, including pre-foreclosure, auction, and REO. During pre-foreclosure, the homeowner has an opportunity to catch up on missed payments or sell the property to avoid foreclosure. If these options are not pursued, the property is auctioned off to the highest bidder. If the property fails to sell at auction, it becomes an REO property.

Implications for Buyers: For buyers, purchasing an REO property can offer unique opportunities. These properties are often sold at a discounted price compared to market value, as lenders are motivated to sell and recoup their investment. However, it’s important to note that REO properties are typically sold in “as-is” condition, meaning the buyer may be responsible for any necessary repairs or renovations. Additionally, the purchase process for REO properties may differ from traditional real estate transactions, requiring buyers to work directly with the lender or a designated agent.

Implications for Sellers: For sellers, having a property go into REO foreclosure can have significant financial and credit implications. When a property becomes an REO, the lender takes ownership and assumes responsibility for its maintenance and sale. The lender will typically hire a real estate agent to list the property and oversee the selling process. However, the lender may also choose to sell the property at auction or through other means. It’s important for sellers to be aware of the potential consequences of foreclosure and explore alternatives, such as loan modification or short sale, to avoid the REO process.


In conclusion, reo foreclosure refers to properties that have been foreclosed upon by a lender and become real estate owned. The foreclosure process involves multiple stages, including pre-foreclosure, auction, and REO. Buyers can find opportunities in purchasing REO properties at discounted prices, but should be prepared for potential repairs and a different purchase process. Sellers facing foreclosure should explore alternatives to avoid the REO process and its financial and credit implications.


– Bankrate.com
– Investopedia.com
– Realtor.com