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What is the difference between a foreclosed property and a bank-owned property?
Wiki User
∙ 8y ago
The two terms are used loosely by many people so they can have an overlap in their meaning.
Foreclosure is a process. When someone says a property has been foreclosed upon they are mostly talking in the past tense. A foreclosure that runs its full course will end with an auction. If the foreclosure stops prior it is normally because the default has been settled through some other means. Normally a default that has been cured is from the loan being settled (in full or for an agreed short sale amount).
When a foreclosure happens the final step is an auction where the lender enters the opening bid. If there is another bidder that offers more they win the auction and become the owner. In that case the property was foreclosed upon and the owner is the party that won the auction. For most practical purposes there is nothing special in that the property has a new owner and there is nothing odd to be concerned about.
When the auction fails to identify a bidder who will pay more than the lender's opening bid the lender becomes the owner. Assuming a bank and not a private lender, the property is classified as Other real estate Owned (OREO). Most people shorten the term to REO. Regulated banks in the US are required by law to dispose of property that is OREO. It is surplus to requirements and banks cannot hold RE for investment purposes.
Wiki User
∙ 8y ago
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