What Is a Bank-Owned (REO) Property, and How Do You Buy One?

A home becomes bank-owned in three steps. The owner stops paying the mortgage, the lender forecloses and offers the home at a public sale, and no buyer meets the lender's minimum. The lender then takes title, and the house goes on the bank's books as REO.

They happen at different stages. A foreclosure auction comes before the bank owns the house. An REO sale comes after.

An REO auction is an online or live sale of a bank-owned home, where buyers compete and the best offer the bank accepts wins. Banks use it to sell many homes quickly and in the open. On Vihara, each REO property shows its starting price next to the property's estimate, so you can judge the deal before you take part. See current bank-owned deals.

Sometimes, but not always. A bank wants its money back, not a bargain for you. The deal is in your own numbers: the price, plus repairs and holding costs, against what the house is worth after the work. An estimate on a property page is a starting point, not an appraisal or a sale price.

Check the same five things every time:

1. The real condition. Look at every photo and, if you can, the house itself. Price in the worst rooms.
2. Title. Ask a title company for a search, even when the bank says title is clear.
3. Occupancy. Confirm whether the home is vacant or occupied.
4. Comparable sales. Look at recent sales of similar homes nearby, not asking prices.
5. How you will pay. Know your route before you commit. Financing is available through Vihara's financing partners, and your own lender can tell you what they will lend on.

Questions about the terms of one property? Talk to a Vihara advisor, at no cost.

Fix-and-flip investors, buy-and-hold landlords, and more and more first-time buyers. Flippers look for the spread after repairs, landlords look at the rent, and first-time buyers look for a house they can afford and live in. See how to find fix-and-flip properties.