The Escrow Hub Blog

Are your buyers looking for a good deal on a piece of real estate? Then purchasing an REO property might be the right choice! Here’s some fundamental information about REO properties you can share with them. To get in touch with a professional escrow company, reach out to Escrow Hub LA today.

What is an REO Property?

When a borrower defaults on his or her mortgage, the lender — a bank or other mortgage broker — eventually resorts to foreclosure proceedings. At its most basic, this means that the lender takes the property back and — in order to cover the loan amount — tries to sell it at a public auction or in a real estate short sale. If neither of these two strategies works, the lender assumes ownership of the property. This is what makes it a real estate owned — or REO — property.

Since the lender makes its money from loans, it’s not conducive to its business to keep the property. For this reason, the lender needs to sell the property. As Investopedia explains, the lender’s REO specialist is responsible for tracking down the deed, reporting on the status of the property, marketing it and reviewing any offers. In addition, the REO specialist works with the lender’s property manager to ensure that the property is adequately secured, as well as properly prepared for bad weather or the winter.

Along with listing the property on the lender’s REO site, the REO specialist usually works with a real estate agent to list it in the multiple listing service — or MLS. As a result, the property appears in search results on Zillow, Trulia, and

Buying an REO Property

If your clients are interested in buying an REO, there are certain things they need to be aware of. While many REO listings are priced to sell quickly, they’re not necessarily a bargain. That means that if they find an interesting property that’s heavily discounted, it’s important to have it thoroughly inspected and researched. There may be issues that aren’t apparent, such as severe damage, an undesirable location or liens on the property. Note that lenders typically sell REO properties as-is, so negotiations to have these issues addressed aren’t likely to be fruitful unless they work with an experienced buyer’s agent.


When it comes to qualifying for financing for an REO property, keep in mind that some lenders won’t approve a mortgage for a severely damaged home, as Zillow points out. As a rule of thumb, it’s smart if your clients try to get financing from the same lender that’s selling the property. At the same time, if the home’s in good condition and their finances are in order, obtaining a loan shouldn’t be more challenging than for a regular property. 

The purchasing process for an REO property can take longer than with a regular home since there are more parties that need to be convinced the lender has done its best to get a good price. So warn your clients that they should be prepared to wait anywhere between a week and 14 days for a response to their offer.

Escrow Company LA

For more information about and assistance with buying an REO, please contact Escrow Hub LA at your convenience.