The REO Guide

REO: And What It Stands For

REO’s stand for “Real Estate Owned” properties. Any lot or home that the bank takes back becomes an REO when the mortgage lender hires someone to manage the repossession and sale of the house because of the homeowner defaulting on payments.

A foreclosure is the act of the bank taking possession of the house through the legal process defined by each state. Once they regain control, the bank must have someone else, a local real estate agent or property firm handle the home auction. This process is long and requires court appearances and specific sale conditions.

What Is A Trustee’s Sale?

A Trustee’s sale is another way to sell off a property when a person does not make mortgage payments for at least 60 days. This method means that the bank must notify the recorder’s office with an intent to sell the property.

Another option is where the homeowner forfeits the home by signing over the deed to the lender sometimes called a deed in lieu of payment. Each state has separate and differing laws that govern these processes.

What Happens In A Foreclosure?

During foreclosure, the bank is attempting to gain control or possession of the property from someone that is at least two months behind on a mortgage loan. Buying a foreclosure has several steps, the process always begins when a borrower or homeowner does not make a payment for at least 60 days.

Some states require a time period called a right to cure that means the lender must give the person time to catch up the payments and get the defaulted loan in good standing. The lending agency must not add excessive penalties or costs during the curing time.

What Happens After The Curing Time?

When a person has not paid for at least 210 days, the bank or mortgage owner can send an acceleration declaration meaning that the borrower must pay all of the loans or be sued. A three-week notice in the newspaper, the address, the day and time of the sale, and a description of the property is required for the auction. The REO property manager must send a certified notice to the borrower at least 14 days before the sale.

Why Do Many Banks Opt For A Trustee’s Sale?

This method is much faster than the foreclosure process, and it does not involve the judicial system. The homeowner will get a notice of the date and time of the auction if the mortgage lender puts the home up for a trustee’s sale. The bank or lender often get more money back with this process.

Many finance companies and lenders opt to auction homes through a trustee’s sales because they require less paperwork, time, and hassle. This method can have other names like non-judicial foreclosure or power of sale foreclosure.

What Can Buyers Who Bid On A Foreclosure Expect?

Most payments are made in cashiers checks or cash since these homes often sell for less than the house is worth in good condition. Many homes are behind in maintenance because the borrower is already in debt.

When buying a property you don’t know anything about the house except the general description the manager lists in the newspaper listing. Each state has specific laws and ordinances regulating the length of time a homeowner can stay in the property once it is in the foreclosure process.

If anyone is living in the home at the time of the sale, the new owner has the right to have the occupants and belongings removed immediately. Most borrowers are out of the homes by the time the auction happens for this reason.

Forfeitures, foreclosures, deeds in lieu, and trustee’s sale properties are considered real estate owned because the bank has to sell them to recoup money for the loan. The sale goes through a certified auctioneer or firm with the house going to the person who bids the most money.

REO’s let the lender have an opportunity to recoup some or all of the money they lent out. Trustee’s sales usually end with the homeowner having no responsibility for the property.

Mountain Valley Realty | © 2017