19 Feb In Plain English – What is an REO and What Does That Mean For Escrow?
The term REO stands for Real Estate Owned properties. These are properties that are owned by a bank or lender and are for sale to the public. These properties were reverted back to the bank after the homeowner was foreclosed upon. If the home fails to sell at auction, the bank will put up the property up for sale through a Realtor much in the same way a homeowner lists their property for sale with a Realtor when selling their home. The key difference with REO listings is that the bank (or lender) is the seller verses the homeowner as the seller in a traditional listing.
REO properties are a hot commodity right now as roughly half of the foreclosures going to auction are reverting to REOs. More and more people are seeing that they can get a great price on an REO property and still enjoy a buying process that is very similar to buying a home in the traditional fashion. However, because the property is owned by the bank or lender, in an REO purchase transaction, there are a few differences in the escrow process from a traditional home purchase transaction.
REO listings offer viewings and inspections just like traditional home buying; the big difference is really in the often rock bottom price and the closing procedures. This is because banks are not in the business of owning Real Estate; their interest is to resell the property as quickly as possible to avoid further risk exposure. As a result, REOs come with a very strict and tight escrow timeline. Most REOs have a 30 day closing, in some states it can be 45 days, and either way banks are not willing to be flexible.
There are a lot of REO properties available right now so if you’re ready to buy and looking for a deal, now is a great time to consider an REO purchase. Your Realtor can advise you on the opportunities and your CV Escrow officer can walk you through a detailed explanation of the REO escrow process. To learn more about the REO buying process and its Escrow implications check out, Bargain Shopping at the Bank-An REO Purchase Overview.