An REO is property that has been foreclosedon by its lender. The title has been transferred to the foreclosing entity - the lender, which is normally a bank. Presently, banks foreclose on a property because either the homeowners can no longer maintain monthly mortgage payments or because the homeowners simply walked away from the property because it is now worth less than what is owed (i.e. borrower owes $500,000 on a property that is now only worth $300,000 in the market). Aside from equity loss, banks spend (1 comments)