What does "REO" stand for in the context of real estate?

In the context of real estate, "REO" stands for Real Estate Owned. This term is used to describe properties that are owned by a lender, typically a bank, after an unsuccessful foreclosure auction. When a property does not sell at auction, it reverts back to the lender, who then takes possession of the property. These properties are often listed for sale to recover the lender's investment.

Understanding this term is crucial for anyone involved in real estate transactions, as purchasing REO properties can come with unique opportunities and challenges. Usually, REO properties are sold at a reduced price compared to traditional sales, appealing to investors and buyers looking for bargains. Proper knowledge of the REO process can help guide decisions in buying, selling, or financing these types of properties, highlighting its importance in real estate education.