As The World Turns – Real Estate Acronyms and Labels

As The World Turns - Real Estate Acronyms and Labels

The words we use. The labels we associate with actions. Like most industries, in the default business we have a number of  unique acronyms and labels. Today I made note of how some of them either do not make sense or are changing.

When I was a young credit analyst at First National Bank in Dallas, we had to learn all about balance sheets. Actually, I had learned quite a bit on this topic at Indiana University with my finance degree. Nevertheless, a question that has bothered me for about 20 years today was actually asked by a client.

Why do they call it REO?

At first, because I am so indoctrinated to years of this industry, I figured he just needed to understand foreclosures so I started with the pat answer. I was quickly interrupted by my client as he explained he has an accounting background and REO mean Real Estate Owned which in traditional balance sheets for banks is the account designated for things like their branches, headquarters and operations centers. Actual real estate owned and a part of their operations.
The light bulb went on as I realized this client had a legitimate point. I immediately looked at him and said Oreo. To the uniformed they would believe I was being rude and asking for a cookie! The reality is bank owned foreclosures in the accounting world are labeled Other Real Estate Owned. Other real estate that the bank does not intend to hold for any period and having nothing to do with operations.

I think somebody decided it was easier to say REO. After all of these years I think I might just start calling it OREO. I like the sound of being called an Oreo Broker! Actually might be very politically correct!

This whole dialogue got me thinking later as I reviewed a document offering a tenant funds to move from the foreclosed property where  they currently reside. For 20 years, these agreements have been affectionately called Cash For Keys. This document was called a Financial Relocation Assistance agreement. Okay, that really is political correctness.

Then I saw an ad for a broker advertising to the banks their services. They thought it was cute to call themselves Involuntary Relocation Enforcers. In today’s default world, I doubt too many people will find that funny.
Just call yourself an OREO Broker. They will know what you mean!

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