REO is an acronym for “Real Estate Owned”.
Generally, REO is good. You want to own real estate. You want to show real estate you own with lots of equity. It shows that you’re “rich”. Banks have REO for real estate that they own to conduct their business.
But for a bank, OREO is not good. A bank financial statement that has OREO (Other Real Estate Owned) indicates real estate that they made a loan on, the borrower defaulted, the bank took it back through the foreclosure process and they now “own” it. It is a non-producing asset. Even worse, it is a testimony that they made a bad loan. It needs to be quickly disposed of.
We found a just-listed bank OREO for sale in Mesa, AZ in a good neighborhood. The terms of the listing were ‘all offers welcome for 10 days, then we will make a decision’. This is going to be very competitive. If you’ve watched the TV reality shows or paid for the ‘get property under market value’ seminars/webinars, you know what I mean. You can tell that I’m not a fan of the ‘get property under market value’ people I’ll explain why in a later post.
We did a walkthrough of the house on Roca and found many things that needed to be repaired and a strange obsession with audio and video cables throughout the house:
A talk with a neighbor indicated that his had always been a rental and the last tenant was evicted.
Then we had to decide if we wanted to make an offer. Yes, we will make an offer, BUT it must be an ALL CASH offer to be competitive:
Jeff walks us through the sales contract:
Is and all-cash offer in the spirit of TMP? No, but neither is the concept of putting up $100,000 and starting from there. That’s not how you, me or the average person should execute a “Monopoly Project” of their own. In later posts we’ll discuss how, and whether, you should start your own ‘monopoly project’.
So what is an OREO?
Turns out it is both: the best cookie ever made,
…and bad news for a financial institution that makes loans on properties that default.