REO stands for “real estate owned” and it refers to prop¬erty that a lender has taken back through foreclosure. Lenders hate this kind of property because on their books it shows up as a liability instead of as an asset. Therefore, they are very anxious to get rid of REOs. However, not so anxious that they’re willing to take a loss if there’s any way to avert it. The big plus for you in dealing with a lender over dealing with a home seller in foreclosure is that it’s a cleaner deal. There’s no crying or recriminations. Also, you can usually get title insurance and sometimes the bank often will even help you with the financing! The downside is that lenders don’t like to admit publicly that they have a REO problem. Many won’t admit they even have any REOs. Thus, you can’t usually just walk in and ask to buy one. (REOs show up as liabilities on the books of lenders. Too many REOs lead to insolvency.) On the other hand, the lender wants to get out from under the REO by selling it, therefore it needs you.

While lenders often keep quiet about REOs as far as the general public is concerned, they are often open about them to legitimate investors. (They also often list them for every¬one to see with an agent, but at that point they typically want top dollar.) To find hidden REOs, you need to let the lender know that you understand what a REO is and that you’d like to bid on one. Once the lender understands that you’re special, and not part of the public that is only inter¬ested in deposits and checking accounts, it might open up. When checking with a lender, look for the person in charge. The first step is to ask for the “operations officer,” who han¬dles day-to-day operations. Then ask to see the officer who deals in REOs. Then you need to make a case that you’re an investor who has the means and desire to purchase.