"REO" is Real Estate Owned. These are properties which have completed the foreclosure process and are currently owned by the bank or mortgage company. This differs from real estate up for foreclosure auction. 
If you buy a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees amassed during the foreclosure process. The buyer must also be able to pay with cash in hand. To top everything off, you'll accept the property totally as is. That could comprise of standing liens and even current occupants that may require removal.
A bank-owned property, on the other hand, is a much neater and attractive proposition. The REO property didn't find a buyer during foreclosure auction. The bank now owns it. The bank will see to the elimination of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing.
Note that REOs may be exempt from normal disclosure requirements. For instance, in Minnesota, banks are exempt from giving a Transfer Disclosure Statement, a document that typically requires sellers to disclose any defects of which they are informed. By hiring Cory Kingbay at RE/MAX Results, you can rest assured knowing all parties are fulfilling Minnesota state disclosure requirements.
Are REO properties a bargain in Twin Cities?
It's occasionally thought that any foreclosure must be a bargain and an opportunity for easy money. This isn't necessarily the case. You have to be very careful about buying a REO if your intent is to make money off of it. Even though the bank is usually eager to offload it promptly, they are also motivated to get as much as they can for it.
Look closely at the listing and sales prices of competing homes in the neighborhood when making an offer on an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in. The bargains with money making potential exist, and many people do very well flipping foreclosures. Still there are also many REOs that are not good buys and may lose money.
Prepared to make an offer?
Most banks have a department dedicated to REO that you'll work with while buying REO property from them. To get their properties advertised on the local MLS, the lender will often use a listing agent.
Prior to making your offer, you will want to work with an agent who is familiar with buying REO properties and discover as much as you can about the condition of the property. In Minnesota, banks/lenders will typically winterize property's to avoid any sort of freeze damage in the winter. It is best to negoiate will the seller/bank to de-winterize the property prior to any inspection. Since banks typically sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unknown damage and withdraw the offer if you find it. As with making any offer on real estate, providing documentation proving your ability to pay may make your offer more attractive, such as a pre-approval letter from a lender.
After you've presented your offer, it's customary for the bank to respond with a counter offer. At this point it will be your decision whether to accept their counter, or offer a counter to the counter offer. Your deal could be final in one day, but that's usually not the case. Since offers and counter offers usually allow a day or more for the other party to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer.
To be set up on a search directly from the MN MLS for new foreclosure listings, please send me your email and description of what you are looking for. This is a free search and will give you up to date listings as the come on to the market in your specified area. Email - Cory@CoryKingbay.com or feel free to call me at 612-978-1724.
