Orlando Real Estate

There are a lot of acronyms and terminology that get thrown around in the real estate business, and many times we don't stop to explain what they mean. When I am speaking with my customers, I do my best to define our jargon. One of the terms that has come up a lot over the last several years in Orlando is REO. What does REO stand for? What does REO mean?

First, REO is an acronym, it is not the river separating the US from Mexico, nor is it a song by Duran Duran. The acronym is used by banks to describe real property that they have foreclosed on and taken into their inventory. The letters stand for Real Estate Owned. That is what banks call properties that they have taken back through foreclosure. Second, REO means exactly what it stands for, Real Estate Owned. Who owns it? The bank that took it back in the foreclosure process. When a property becomes REO it means the bank owns the property.

The foreclosure process varies by state, but the end result is the same. Once the bank has foreclosed on the property they take it back into their inventory of real estate owned. At this point, Freddie Mac, Fannie Mae or HUD my have to settle with the bank if there was some type of guaranteed loan involved. To the end consumer it doesn't make a lot of difference if the bank, Freddie, Fannie or HUD owns the property. It is called an REO regardless, and it just means that the property has been taken back through the foreclosure process.

Two of the most common questions I get about REO's are:
1-What will the bank do with it?
2-Can I buy it from the bank, before it goes on the market?

The simple answer to each of these questions respectively is: 'sell it' and 'no'. Sometimes banks have issues to resolve with the property, before they put it on the market for sale. Many times they will actually make minor or even major repairs to the property to get the most from the sale. They always get multiple broker price opinions (BPO), before listing the property with one of their network brokers. Sometimes the bank will sell off properties in bulk sales to investors purchasing multiple properties at once. The bank is NOT going to sell it to you, before it goes on the market though. They want to get as much as they can for the property, which is why you always see them listed with a REALTOR®.

Posted by David W. Welch on February 4th, 2016 1:44 PM
Last week I filled in for Hazel Hissam. I am on her team working on REO properties in addition to my regular real estate practice. There seem to be a lot of folks (buyers and agents) out there who are unfamiliar with REO sales, so here are a few things you need to know.

The first important thing you need to understand is that REO sellers are a bit different than traditional sellers. They are dealing with thousands of properties across the country. They do intend to sell their inventory, but they really do not care if it is the property you are trying to buy or one of the hundreds of others they are negotiating on at any given time. So, when you start to think "don't they want to sell this property", the answer is yes, but that does not mean they are going to give you what you want. The longer it is on the market, the more negotiable you may find them to be, but if you play the waiting game you may miss out on the property too.

The second important thing you need to understand about REO sales is that each lender, Fannie Mae and Freddie Mac has their own process. You are not going to go around that process, and there are no short cuts to that process. These processes do not need to make sense to you, because they won't. You don't even need to fully understand the process. You do need to understand that when they give you a time frame, you need to meet it. If you do not meet their time frame, they will cancel your offer, and you will go back to square one. Pay attention to the instructions you are given, and follow those instructions. If they say wire the deposit - wire the deposit.

Finally, in Florida if you are purchasing an REO, it will come with a title insurance policy and a marketable title. Liens, home owners association (HOA) fees, taxes, etc., will be settled by the seller at closing. Do not write in extra verbiage on the contract or the sellers addendum stating "seller to provide clear title" or some other language about this. The seller will not sign "written in" terms or addenda with additional terms. I am not a lawyer, your agent is probably not a lawyer either, so if you have concerns about this speak to a real estate lawyer in your state to see how this works where you live. You should do this before signing a contract. You can also have a real estate attorney review the title evidence prior to closing.

Auction - The rules are different for auction properties. Most auctions I am aware of here in The Sunshine State only provide a quit claim deed, and do not warrant anything about the property. You should have your own title search and lien searches performed, before bidding on an auction property. Also, you will likely pay an "auction premium" of 5% of the sales price on top of your offer.
Posted by David W. Welch on November 8th, 2014 10:38 AM


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