It is a procedure by law; whereas 'real-property' is held as security for re-payment of a debt and is sold to pay the debt in the event of default. If the borrower defaults, the lender can begin the action of foreclosure. Note: Laws vary from state to state.
REO (Real Estate Owned):
After the foreclosure action is complete, the ownership of the home reverts back to the bank or lender. The home - collateral for the loan - becomes an asset on the bank/lender's books. This asset is referred to as 'Real Estate Owned' or REO.
Lenders and mortgage banks are in the money lending business - not the real estate business. As such, when they take ownership of a property through foreclosure, their primary concern is disposing the asset (getting it off their books) as soon as possible.
he bank/lender normally involves at least two local real estate professionals in determining market value. The first is a real estate broker. The second is usually a certified appraiser. Both professionals complete detailed property reports, which include: interior/exterior photos (depicting condition), listing and comparables as well as an estimate of repairs needed. In addition, their report will include both as-is and as-repaired property values.
Banks/lenders are no different than other sellers. Like you, they want the best terms, the best price and a quick closing.