Bank owned property is also known as REO property. REO stands for Real Estate Owned. An REO or bank owned property is one that has come back into the lender’s portfolio through the foreclosure process. The terms REO or bank owned properties mean the same – properties that have come back into the lender’s portfolio through the foreclosure process.

When a property is sold through a foreclosure auction, its owner usually owes more to the lender than the market value of the property itself. This is often a barrier to selling the property, and sometimes such foreclosure auctions do not draw any bidders. As a result, not many foreclosure auctions end with the sale of the property, rather the title reverts back to the lender holding the lien. The property reverts to the lender’s portfolio and becomes a bank owned or REO property.

 If you are looking to buy a house as your primary residence or for investment purposes, you can get a huge discount by buying a bank owned property. Most lenders sell bank owned properties below market value.

 Before you buy a bank owned property, make sure you conduct a physical inspection of the property. Bank owned properties are generally sold “as is” which means that the discount you just saved on the purchase price can easily be eaten up by unforeseen expenses such as repairs not immediately apparent in an exterior inspection. Most homes go into foreclosure because the homeowner has financial difficulties. When the homeowner has financial difficulties, the homeowner is unlikely to spend money on maintenance which usually means that the house has not received needed repairs or general maintenance for a while. Sometime a frustrated homeowner who looses a home in foreclosure may vent his frustration on the home and damage the property. You must be prepared to do renovations and repairs.