KW Default Solutions
What REO means
REO means real estate owned. A foreclosure filing alone doesn't make a house REO. It becomes REO once a lender or investor owns it, usually after a foreclosure sale or a deed-in-lieu (when the homeowner signs the deed over to the lender to avoid foreclosure).
The owner usually isn't the one you talk to. A servicer or asset manager handles the house for them, and your main contact is often the asset manager. Ask early who you're working for and who can give you instructions.
How it's different from a normal listing
- Your seller is an institution, such as a lender or investor, not a homeowner sitting across the kitchen table.
- You report to an asset manager, often through an online portal, and follow that client's rules.
- The client approves the price, often after reviewing your BPO (broker price opinion).
- Someone may still be living in the house even though they no longer own it.
- If it's vacant, you look after it: you check on it, document it and report what you find.
The assignment arrives
In our REO training, assignments come through portals such as Bid on Homes, ResNet or Pyramid. Before you drive anywhere, do your homework at your desk:
- Pull an RPR report and the tax record.
- Look up the past MLS history.
- Look at the house and the street on Google Earth.
The history usually tells you something. In our trainer's experience, a lot of these houses were listed before as short sales that didn't go through, and they're sitting vacant now.
The first visit
Bring the tax record and your assignment letter. There's no sign in the yard yet, so to the neighbors you're a stranger walking around someone else's house, and someone may call the police. The paperwork shows who you are and why you're there.
Locksmiths may ask too. In our trainer's experience, a new locksmith will want to know whether you really have a listing assignment before changing a lock, so send them the tax record and assignment letter as well.
A reporting deadline doesn't give you permission to go inside. If you can't get in, report that. Don't push.
Is anyone living there?
Look for cars, lights, mail, packages, sounds and furniture you can see through the windows. If no one answers, follow the client's authorized notice and reporting process. Take a timestamped photo of every attempt, and don't treat no answer as proof the home is vacant.
If someone is there, keep it brief and polite. Say who you are, but don't ask to come in, talk about moving out or act as if you have more authority than your written assignment gives you. If anything feels unsafe, leave. Then report it to your asset manager, who decides next steps with local professionals.
Inspect and photograph
Start outside. If the assignment authorizes an interior visit, go through only the rooms and areas it permits and that are safe to access. Photograph floors, ceilings, appliances and under the sinks, and note what you can see of the AC, lights, windows, sliding doors and the pool if there is one. Observe and photograph only. Don't test, repair or diagnose anything unless the assignment says to. Turn on timestamps on your phone camera, because some clients require them.
Keep your own before-and-after photos of any repair. Don't rely on the contractor's set.
Vendors and repairs
When the house needs work, get the bids the client's current instructions require, priced on the same items line by line so you can actually compare them, then send them to the client with your photos.
A bid isn't approval. Nothing starts until the client says yes. Start building your vendor list now (locksmiths, contractors, handymen), because good tradespeople get harder to find as volume picks up, and some large companies already keep many of them busy.
Listing and showings
Some clients prefer "Corporate-Owned" in the MLS instead of "REO," "Foreclosure" or "Bank-Owned." Keep the remarks positive.
In our training, showings go through ShowingTime, with lockboxes that use rotating codes so an agent can't walk back in later without asking. Follow up after every showing, and send the client a weekly report built from that feedback.
Offers to closing
Check every offer before you send it on: the right address, proof of funds, a closing date and all the addenda. One missing piece slows the whole file.
Once there's a contract, our trainer asks for the earnest money deposit (EMD) within 24 hours. Your contract and state rules set the actual deadline. And look closely at the commission on the closing statement. In our training, mistakes there are common.
Run it like a business
Keep one folder for each property. Put the property ID in every email subject line so the client's system can sort your messages, and use a branded email address instead of a free one.
Some portals charge real fees, and some fake "assignments" do too. Check the company and phone number yourself before you pay anything.
A fictional first visit
This example is made up. You pull up to a house you were assigned an hour ago. There's no sign yet, and packages are stacked on the porch. As you photograph the front, a neighbor comes out and tells you she's called the police.
You stay calm and wait. When the officer arrives, you show the tax record and the assignment letter.
A pile of packages could mean someone lives there, or it could mean no one has picked them up in weeks. You can't tell yet, and that's exactly why you don't try the door. You leave a notice, take a timestamped photo of the porch and your attempt, and report what you saw. The visit ends without a problem, and your file shows what you did and when.
Your next step
Open your MLS and find one bank-owned or corporate-owned listing. Do the desk work from the assignment step on it: RPR, tax record, past MLS history and Google Earth. Then bring what you found, and your questions, to a KWDS training.
Questions? Ask our team through the KWDS contact form.
KW Default Solutions is a resource for licensed agents who are new to distressed-property work. This article is general education, not legal advice. Requirements vary by client, state and brokerage.