What Is an REO Property?

REO stands for real estate owned. Real estate owned properties are owned by the lender, who takes ownership because the borrower defaults on a mortgage.

If the borrower defaults, the lender forecloses on the property. After foreclosure, the lender will first try to sell the property in an auction. The lender's goal is to get rid of the property quickly and make up for the money lost when the borrower defaulted (and the money the lender spent on completing the foreclosure process). Foreclosed property that does not sell at the auction becomes REO property. The lender that owns the REO property will continue trying to sell it.