REO stands for “Real Estate Owned” and is the term that the mortgage holder uses to identify homes that they have foreclosed on and they are holding in their inventory.
These “REO listings” are held in the banks inventory for as short a period of time as possible because a Bank or lending institution does not want to own Real Estate and until recently, rarely did. Banks and lenders do not possess the infrastructure needed to maintain, market and sell these foreclosure properties, especially at the volume they are experiencing currently.
Compared to only a couple of years ago, lenders are carrying 300% to 500% more foreclosures in their inventory. So what they couldn’t manage before has become nearly impossible to manage today. Before the house is foreclosed on, vacated and becomes a REO listing it is considered a pre-foreclosure. Pre-foreclosures are historically bad investments for a number of reasons. Once a home becomes a REO property this is when it is the most effective to spend your efforts on making a purchase of the property.
To find out why pre-foreclosures are bad investments read: Pre-Foreclosure.