By now, if you don’t know that REO stands for Real Estate Opportunities, you’ve been living under a rock.
For agents and brokers in California, REO (bank parlance for foreclosed properties which are now, to them, “Real Estate Owned” assets) properties ARE the market. After all, with home values plummeting nearly 50% in some areas, who in their right mind wants to sell a property if they don’t have to?
Brokers and agents still need to make a living; banks haven’t a clue as to how to market and sell residential real estate, so who else are they going to turn to? It’s a match made in heaven. But banks being banks, this particular heaven can turn into a living hell for an unsuspecting broker/agent. You need to know how to navigate through the traps and pitfalls, and still make a living.
First, buying an REO asset is not the same as buying at a non-judicial foreclosure sale (“Foreclosure”). A Foreclosure is a legal process where non-performing loans are auctioned off by the trustee in a deed of trust. While the bank (or person) who lent the money is the first bidder, and the property could go to them, it doesn’t always happen that way. Sometimes, a third party bids at that sale and buys the property. That third party (those who have been doing this for a long time are called “professional bidders”) generally re-sells the property almost immediately – but that sale is NOT a REO sale. The distinction is critical – especially when it comes to disclosure obligations. So remember, REOs are “bank owned” properties.