What is REO? Here’s one for the longtail and a sort of WIKI entry to my BLOG!!!
In any business it is hard not to slip into the industry vernacular and forget that our audience may not really be following. REO is an acronym for Real Estate Owned. Here in Simi Valley and Moorpark an REO property falls under the California process of foreclosure. California is a Trust Deed state. The term mortgage is a more universal term like Kleenex or Xerox for Californians.
When a person borrows money against a property the Loan is made and secured against the property with an instrument known as a Deed of Trust. The Deed of Trust has three partys. The Lender (Beneficiary), The Borrower (Trustor) and the Trustee – an entity or person who holds the Title to the property until the Loan (secured by the Deed of Trust) is paid.
In the event that the Trustor defaults on the Loan, the Trustee is vested with the right (power to sell) to foreclose (non Judicially) on the property with in the parameters allowed by the state of California. At the time the Trustee is entitled to set the date of sale, public notice is given. The minimum bid is set at the amount owed on the property plus payments in arrears, plus costs. This minimum amount is usually more that the market value of the property so the Beneficiary ends up with the property and then will either hire a real estate broker or private auction company to sell the property. Once the Beneficiary takes title to the property, the property is now known as an REO.