An REO is a property that has been foreclosed upon by the bank, where the bank took back possession due to non payment from a borrower.
What Does REO Stand For
REO is short for Real Estate Owned. It is at that point the bank has taken possession of the property through the foreclosure process within the courts.
Depending on your state, the REO foreclosure process can happen in months or could take years. The bank will initiate the foreclosure usually through the first step called the “Lis Pendens.”
What Is The Lis Pendens
The Lis Pendens, in many cases is the first stage of the foreclosure proceedings. This happens when a borrower stops making payments to their lender and the lender files suit in the courts.
The Lis Pendens may have a different name or terminology depending on your jurisdiction.
Obviously in order for the borrower to get a loan they have to provide certain supporting documentation that shows they can qualify for the loan.
In some unfortunate circumstances, the borrower is unable to pay for the loan and this is when a REO foreclosure COULD happen.
What Are Reasons For REO Foreclosure
There are many reasons why someone would stop making payments on their mortgage and the bank ends up with the REO Foreclosure.
Some are as follows:
- Job loss
- Demotion in their job
- Job relocation
- Sickness in the family
- Other debt obligations
- Medical Bills
To name a few…
Now, not all delinquent borrowers end up in foreclosure. Borrowers in default do have options such as Sell The Property, Get Current On The Mortgage, Short Sales, Deed In Lieu Of Foreclosure, Loan Modification, Forbearance and Bankruptcy.