Here are the differences between foreclosure homes and bank-owned homes.


Whether we’re talking to first-time homebuyers or seasoned real estate clients, there’s always a bit of confusion regarding foreclosure sales and bank-owned sales (also known as REO—real estate owned). So today, we’re going to clear up any misconceptions by explaining the differences between these two types of sales.

Foreclosure Sales:
A foreclosure sale actually takes place at the start of the foreclosure process. The seller hasn’t paid their mortgage, so the bank has set a date for a foreclosure auction. The deposit is typically announced in the paper, and the auction is held at the courthouse or in front of the property itself. Anyone can come, but the buyer must have cash in hand.

The bank isn’t in possession of these homes, but they do have the right to auction them off. What makes these sales difficult is that the properties are often as bare as possible, sold as is, include any uncleared liens and judgments, and may still have people living there—people the buyer is responsible for vacating. It’s a risky and bare-bones purchase.

“When you’re searching for foreclosed homes online, pay attention to what kind you’re looking at.”

Bank-Owned Sales (REOs):
Because of the risks involved in a foreclosure sale, banks are usually the ones who buy back the foreclosures. When most people think of buying a foreclosure home, this is what they’re thinking of. The bank-owned properties are listed for sale on the market, often marked as “REO,” “bank-owned,” and sometimes “foreclosure” or “foreclosed.”

This property has all of its liens cleared, has been vacated, and has been secured and winterized. These sell much like a traditional property and are listed on the MLS as such, except you’re dealing with a bank instead of with a traditional seller. There usually aren’t any restrictions on financing for these homes, but depending on the type of financing you’re going for, they’ll typically have a condition, appraisal, or inspection you must do.

When you’re searching for foreclosed homes online, pay attention to what kind you’re looking at; many are labeled as “pre-foreclosure,” “foreclosed,” or “foreclosure.” They’re not all the same, so look out for our upcoming video, where we’ll discuss their differences.

In the meantime, if you have any questions or need more information, feel free to reach out to us. We look forward to hearing from you soon.