REO is an acroynm for Real Estate Owned. It is bank terminology. I’m not sure what bank invented the acroynm but most of them use it. It describes their real estate holdings. In case you didn’t know, banks don’t like to hold real estate, they want cash.

The two most common ways banks obtain real estate holdings are through foreclosure & deed-in -lieu.

1. Most everyone now understands what a foreclosure is. But to simplify, it’s when the bank commences a lawsuit to sale a property via a foreclosure sale due to non payment of the mortgage and note. At the foreclosure sale anyone can bid but the bank bids to protect their mortgage amount and often they end up with the property back.
2. A deed-in-lieu (DIL) means a deed-in-lieu of foreclosure. This is when the owner of a distressed mortgage property usually has a no equity mortgage and can’t sell the property for high enough to cover the mortgage. Instead they sign over the property deed to the bank with the agreement that the bank will not come after them for the mortgage. The benefit to the bank is that they save the cost of foreclosure and the unit is given to the bank in unoccupied clean condition. The benefit to the consumer is that the bank agrees not to go after them for any deficiency and it is probably less harmful on their credit score. However this may not work if there is a second mortgage on the property.

Both ways the bank ends up with the property. Different banks have different systems once they take back a property. Most large national banks such as Bank of America and Wells Fargo Mortgage have similar systems. Once in their system the property is directed to the REO department. The REO department will have different people assigned to specific tasks. However more national banks are now using REO Servicers to do the tasks.

There is the: 1. eviction specialist (if needed), 2. Pre-marketer 3. asset manager 4. Closer. Soon after the REO is in the banks system a local real estate agent is assigned to the property (this is where I come in). Our first and usually computer generated task is to check on the occupancy. If unoccupied, a clean up staff is assigned. The agent & bank will assess if the property needs repairs. Many banks want to repair their properties in order to make the home lendable and get a higher price. Other banks & REO servicers just want a quick sale with the least amount of output of money.

The bank usually gets an appraisal and Broker Price Opinion (BPO). A price is determined and the property is listed through a local real estate company. Often buyers are hoping they can buy the property directly from the bank or before the property is listed. This isn’t going to happen. The national banks/servicers have their processes and stick to them. The bank or servicers employees can not vary from the established and successful systems. Local regional banks may sell their REO properties in a different manner.

 Like all sellers, banks who own Kauai REO property want the best possible price. But the difference from private owners, is that not only do banks want a good price for their property, they want to sell it today, and the asset manager does not have an emotional attachment to the property. REO pricing can be aggressive, often priced below my recommendations.

Many a good deal can be achieved by buying an Kauai REO property. But you don’t have some of the same safeguards as in a traditional sale. Inspection periods are shorter and the bank will often not pay for termite treatment or surveying. But if you can over look some of these usual expectations you may be happy with your newly purchased Kauai REO.               

A trash out is needed    (This REO needs a trash out, to be ordered by the premarketer)

2021 Kauai REO Update:

Because of the eviction moratorium and the moratorium on foreclosures there are not as many Kauai REOs as there were in previous years. I do have some in my queue that will come up later this year. There will not be a big fall out of foreclosed homes due to homeowners not being able to pay their mortgage due to the pandemic but rather a sudden surge due to a hold on filings from pre pandemic foreclosures. An example of this would be reverse mortgages where the home owner has died.

Feel free to call 808 652-6174 or email me at Kauaidreams97@gmail.com with any questions you might have or an appointment to see current Kauai REO properties. Aloha Julie.

Also Read: https://kauaidreams.com/articles/kauai-reos-foreclosures/

Buying a foreclosure on Kauai, Hawaii-Kauai Foreclosures.

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