REO is the property owned by a bank who has foreclosed on a home owner.

A homeowner gets behind on their mortgage payments for whatever reason and the lender notifies them in writing stating that the lender plans to foreclose on the property.  At closing, borrowers sign a Deed of Trust that gives the lender the right to take back the property if they do not make the mortgage payment timely.

North Carolina uses a non-judicial system and only has to notify the county clerk where the property is located to start the foreclosure proceedings which results with the property being sold at the court house steps.  The foreclosing bank acting through their Trustee sets the Opening Bid for the auction at the court house steps which in most cases is the amount they are owed plus any back interest, borrower fees, and attorney fees.  The bidding is open and anyone can bid on the property that is present.  The Trustee typically sets a starting bid and if no one else makes a bid then or during the 10 day upset period, the bank will own the property.

The banks do not like being  in the property ownership business.  They are in the property lending business!  Owning property also limits the amount of money the bank can lend.  This is their motivation to dispose of REO properties as soon as possible.  Typically, the bank begins this process by having an appraisal and a Real Estate agent perform a Broker Price Opinion (BPO).  The lender then sets the list price for the property usually within a few thousand dollars of the auction price they paid.  It will be listed in MLS.  The bank should be aggressive on the listing price and will lower it approximately $5,000 every 45+/- days until it sells.  Again, they are eager to sell this REO and get it out of their inventory.

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