"REO" or Real Estate Owned are homes which have gone through foreclosure that the bank or mortgage company presently owns. This is unlike a property up for foreclosure auction. 
When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accrued during the foreclosure process. You must also be prepared to pay with cash in hand. Finally, you'll accept the property totally as is. That may comprise of current liens and even current occupants that may require expulsion.
A bank-owned property, conversely, is a much neater and attractive proposition. The REO property did not find a buyer during foreclosure auction. The lender now owns it. The bank will take care of the elimination of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing.
Note that REOs may be exempt from standard disclosure requirements. For example, in Texas, it is optional for foreclosures to have a Property Disclosure Statement, a document that normally requires sellers to tell you about any defects of which they are knowledgeable. By hiring Calstate Realty Services, you can rest assured knowing all parties are fulfilling California state disclosure requirements.
Are REO properties a bargain in San Diego?
It's occasionally assumed that any foreclosure must be a bargain and an opportunity for guaranteed profit. This often isn't true. You have to be cautious about buying a REO if your intent is to make money off of it. Even though the bank is often eager to sell it fast, they are also motivated to get as much as they can for it.
When pondering what to pay for REO property, carefully analyze comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the house for resale. There are bargains with potential to make money, and many people do very well buying and selling foreclosures. Still there are also many REOs that are not good buys and may not be money makers.
Ready to make an offer?
Most banks have staff dedicated to REO that you'll work with when buying REO property from them. Usually the REO department will use a listing agent to get their REO properties listed on the local MLS.
Prior to making your offer, you'll want to contact either the listing agent or REO department at the bank and find out as much as you can about what they know concerning the condition of the property and what their process is for receiving offers. Since banks typically sell REO properties "as is", it's often prudent to include an inspection contingency in your offer that gives you time to check for unseen damage and withdraw the offer if you find it. If, as a buyer, you can provide documentation showing your ability to secure financing, such as a pre-approval letter from a lender, your offer will be more attractive and likely be accepted. (This holds for any type of real estate offer.)
Once you've submitted your offer, it's customary for the bank to make a counter offer. From there it will be up to you to decide whether to accept their counter, or submit another counter offer. Your deal could be settled in a single day, but that's rare. Since offers and counter offers usually allow a day or more for the other party to respond (and employees at a bank don't work nights or weekends) you could be looking at a week or longer.
