REO is an acronym for “Real Estate Owned” by lenders. They are also known as “Lender Owned” properties. Lenders end up with REO’s when the properties that went to a trustee sale were not sold.
In the event that there is no winning bidder at the trustee sale, ownership reverts to the beneficiary, the lender. REO’s are a great opportunity to purchase real estate many times at a lower price than other comparable homes in the same area. The reason for this is that the property usually needs attention such as deferred maintenance, repairs or remodeling.
It is always a good idea to have a professional physical inspector conduct a physical inspection checking out all components of the property on all properties you make an offer on. In my opinion this is a MUST for REO’s as lenders are exempt from providing many of the due diligent disclosures a traditional homeowner would supply to a buyer.