People planning to move aren’t the only ones who put their homes up for sale. Lenders also list and sell houses that have been through foreclosure.
These bank-owned homes — also known as real estate-owned (REO) properties — can be worth considering if you’re a first-time or move-up buyer. REO homes aren’t necessarily cheaper than buying from a traditional seller. But with lenders motivated to unload them from their inventory, you’re likely to get a fair price.
There are also more bank-owned homes available these days. During the first half of 2026, lenders took possession of 27,983 homes, according to ATTOM, a real estate data company. That’s a jump of 33% compared to the first half of 2025 (though still under pre-pandemic levels). This rise in inventory could push lenders even more to offer reasonable prices to buyers. And with home costs still on the rise in many areas, paying a fair price is more important than ever.
Does a bank-owned property sound like it’s up your alley? Here’s what to know about finding and buying one.
What is an REO property?
Bank-owned or REO properties are foreclosed homes that were repossessed by lenders and failed to sell at auction. Fannie Mae and Freddie Mac, the government-sponsored enterprises that purchase mortgages from lenders, also have REO properties.
Here's how a home becomes an REO property:
- After a borrower fails to make mortgage payments for a certain period, a lender can begin the foreclosure process.
- The lender issues a notice of default, then later, if the borrower still hasn't made payment, a notice of sale.
- Unless the borrower comes up with the money, the home is offered for sale at a public auction.
- If the house doesn't sell at auction, the lender takes possession of the property and sells it to traditional home buyers or real estate investors.
A home can also become bank-owned if the lender accepts a deed-in-lieu of foreclosure.
Pros and cons of REO properties
Pros
Sometimes priced below market value, especially if the property needs repairs.
You can typically tour the property and have it inspected.
Many lenders accept offers only from potential homeowners — not investors — for the first few weeks of a listing.
Generally free of liens, back taxes and other legal debts.
Cons
Often sold as is.
Offers on REOs pass through multiple reviewers, so responses can take a while.
Deferred maintenance is common, and some previous owners intentionally damage the property or remove fixtures in response to foreclosure.
A vacant home can attract issues like pests, squatters and more.
How to find bank-owned properties
Bank-owned properties are for sale in virtually every city. You can find them through:
- Real estate agents: Bank-owned properties are on the Multiple Listing Service (MLS), the database that real estate agents use to see and post listings of homes for sale.
- Bank websites: Some banks let you search for real estate-owned properties directly on their websites. This includes large national lenders like Bank of America as well as regional banks like Regions Bank and M&T Bank.
- Government and government-sponsored enterprise (GSE) marketplaces: There are also a few government-run sites that can help you find foreclosed properties. This includes Fannie Mae's HomePath, Freddie Mac's HomeSteps and the HUD Homestore.
- Specialty real estate listing websites: Websites and companies that connect buyers with foreclosed properties, such as Auction.com, Hubzu and RealtyTrac, show listings for REO properties.
How to buy a bank-owned home
Buying a real estate-owned home is similar to purchasing a house from a traditional owner, but with a few differences. Here are some tips:
- Before shopping, get preapproved for a mortgage to show you're a qualified buyer, just as you would when shopping for any type of home.
- Find a real estate agent with experience helping clients buy REO properties.
- Work with your real estate agent to make an offer. Lenders generally price foreclosed homes below market value in an effort to sell the home fast. After you make an offer, it may take longer to complete negotiations than with a traditional owner because multiple people at the lender may need to give approval.
- Expect your own mortgage lender to require a home appraisal to estimate the property's market value.
- Get a home inspection to learn about the property's condition and needed repairs. An inspection is always recommended when buying a home, and it's critical when purchasing an REO property because records of maintenance and repair work may not be available. Most REO properties are sold "as is," so you'll want to consider the cost of repairs in your offer.
- Get a title search to check for any liens against the property that might not have been discovered at foreclosure.
- Consider a renovation mortgage if you're thinking about buying a bank-owned fixer-upper. A renovation mortgage lets you get one home loan to combine the cost of improvements and the purchase price.
Frequently Asked Questions
Are REO properties cheaper than other homes?
Sometimes, but not necessarily. REO prices are generally based on comparable sales in the surrounding neighborhood. You might have some wiggle room for negotiating a discount if the property has substantial damage compared to similar homes that have been sold nearby.
Can you use an FHA, VA or USDA loan to buy an REO home?
Often, yes — however, the property will need to meet the minimum property standards set by the FHA, VA or USDA, depending on the type of loan you want to use. While exact standards vary between these government agencies, they generally require the property used to secure a loan to be structurally sound, safe and in good repair. For an REO property to qualify for a USDA loan in particular, it must also be located in an eligible rural area.
Can you negotiate with a bank on an REO home?
Yes. Negotiations are typically managed by a bank’s local listing agents, and they might be willing to budge on the price, especially if the property isn’t in great condition. If the lender isn’t open to negotiating on the price, you might be able to ask for either a lower rate or reduced closing costs instead.
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