What is the difference between REO and foreclosure?

1. What is the difference between REO and foreclosure? There's one key difference between a property that's in foreclosure and property listed as "​real estate owned​," or REO. Property in foreclosure is being taken back by the mortgage lender; an REO property has already been taken back, but the lender hasn't been able to sell it. Foreclosure Foreclosure occurs when a mortgage lender seizes a property because the owner has stopped making payments on the loan. Foreclosure procedures vary from one state to the next, but in general, lenders don't get the ball rolling on foreclosure until the owner has missed several payments. In some states, the lender has to go to court to get permission to foreclose; in others, the lender already has the authority. The property owner has the right to challenge the foreclosure and usually gets a "last chance" to get current on the payments. If all that fails, the lender evicts the property owner, takes the property and tries to sell the property. REO REO is industry shorthand for "real estate owned" -- owned by the lender, that is. REO properties are also known as "bank-owned" properties. The lender is responsible for maintaining the property and paying the property taxes. Lenders, of course, aren't crazy about having to do this. Their business is lending money, not property management, so they want to sell their REO properties. Mortgage lenders' asset managers work with real estate agents to try to sell their properties.