If a foreclosed property does not sell at public auction, the lender, usually a bank, takes title and it becomes Real Estate Owned (REO) by the lender. Since the lender does not want a non-performing asset on its books, it will clear the title (get rid of liens against it), maybe do some cosmetic repairs to the property, and put it back on the market at a discount to get it sold.
The reason you hear about so many REO’s right now is that most of the properties up for sale at foreclosure auction are worth less than the total amount owed to the bank. Typically, the minimum opening bid at these auctions equals the outstanding loan amount, plus the accrued interest plus any fees associated with the foreclosure sale. These properties aren’t selling at the foreclosure auctions because the opening bid is just too high. The lenders get these properties back then sell them at a discount to move them quickly.
REO’s are often listed with Realtors and you can find them on the MLS. You can also find out about them at the courthouse, often before they’re listed with a Realtor, so you’re able to negotiate directly with the bank.
There are many ways to find REO’s. Here are some resources for you:
Let me know if you find one!