Friday, February 27, 2009

REO and Others Defined

So what's an REO? By now, if you don't know you, must have been living on the Moon! Seriously, some people don't know what they are and the differences in bank owned and foreclosures.

Let's start with some definitions. First a REO is Real Estate Owned by a bank or another lending institution. In the 80's and with some government agencies they are called OREs or Owned Real Estate. Guess you could call them OREO's, and we did in the 80's! What that means is that the bank or other institution took them back, owns them, because someone did not make the agreed payments or comply with the agreed terms.

In California when you purchase a home you sign a note that you promise to pay the money back to the bank on certain terms. That note is secured with a Deed of Trust or Trust Deed that says if you fail to make your payments or meet the agreed terms the bank has the right to start a legal procedure to collect the debt and/or take the property to recover their loss.

This process is called a FORECLOSURE. It is a legal process where the the bank gives you time to make up the payments or correct other things like pay your taxes. If you don't do this in the time allotted then the bank, individual, or other entity then all the money you owe is due and if you don't pay all of it, plus attorney fees, etc. they will sell it. In the past you may have heard the term "at the court house steps." That's were many sales take place but they can also take place in an office or at the property.

The sale is often referred to as a FORECLOSURE SALE or FORECLOSURE AUCTION because the bank says what they want and anyone can offer more. You just have to have the cash or cashiers check with you! In this market, no one wants to buy many of them so they go back to the bank. Now the bank owns them and there you have it--an REO or ORE.
So you can see that "bank owned," REO, ORE, and foreclosed home are really one in the same.

Next time, Opportunities with Bank Owned Real Estate

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