Can REO Homes Be Saved by the Owner?

Generally speaking, an REO home – a real estate owned home – is one that is owned by the bank or lending company or other financial institution/government entity because the previous owner failed to make payments on time and defaulted on the loan. The property then went up for sale at a foreclosure auction, but failed to sell. This resulted in the property reverting to the bank or lending company, who is now faced with the prospect of selling a property that otherwise is dead weight on their balance sheet.

Looking at a REO home from this perspective, by the time an REO home becomes an REO home it is too late for the home to be saved by the owner. The owner has already lost the home to foreclosure, at which point the property became under the ownership of the bank.

The best opportunity to stop a foreclosure is before the property is sold at an auction. Up until that point, the homeowner can either pay off the delinquent balance, declare Chapter 13 bankruptcy (in some circumstances), or enter into a loan modification program and hopefully work out an agreement with the bank.

Once the house has been sold, however, the opportunity generally has been lost. The only way to recover the home once it has become a REO home is to either win a legal action against the lending company (which is rare) or somehow purchase the house outright.

Other than that, though, an REO home cannot be saved by the owner once it reaches that status.