Although they are typically the ones to loan consumers money for mortgages, banks are not in the real estate game. Bank personal do not want to be in the business of showing and selling homes, but as the foreclosure rate increases steadily in America, many of the properties they mortgaged are reverting back to their ownership. When a property becomes Real Estate Owned (REO) a bank is the official owner of the defaulted property.
There are many stages of the foreclosure process. They are:
- Notice of Default
- Notice of Sale
- Trustee of Sale
During any of those stages, the original homeowner can still work on keeping their home. If they can renegotiate their mortgage with their lender or come up with the money in full to pay off their back debt then the process of foreclosure.
The last step of the foreclosure process is when a home becomes REO. A home will become Real Estate Owned only occur if a home cannot be sold through a Sheriff or Public Trustee Sale or if the homeowner negotiates an agreement with the bank during a pre-foreclosure or at the public auction. At that point in time the property then reverts back to the lender. If the loan was backed by a government agency such as HUD, the property may become a government foreclosure. Homes sold directly through lenders are sold with a clean title, meaning no additional taxes are due.
The bank then has a goal to sell the property to make-up for the unpaid loan amount. Knowing that there may be a substantial amount of money to recoup, the lender typically clears the title and will perform the needed maintenance and repair on the home. After that point, the REO property is generally sold as is. Because the bank is investing some money in to try to bridge the gap of their financial losses, the bargains for these types of properties are limited.