Banks such as Wells Fargo gain full ownership of foreclosed homes after they are unsuccessful in selling the property at auction, explains Investopedia. The common term for bank-owned homes is real estate owned properties, known as REO.
Wells Fargo and other banks lend money to customers who wish to purchase or refinance homes. Once the transaction is complete, the customer owns the home, but the banks hold a lien position on the property’s title. If customers default on their mortgage payments, the banks begin the foreclosure process on the homes. When the foreclosure process is complete, the banks attempt to sell the homes at auction. If the banks are unable to sell the properties at auction, the homes are now bank-owned properties. Essentially, the home was once customer-owned, but the county that holds the title sends the property back to the original lien holder as a result of the foreclosure, explains Wells Fargo.
Banks such as Wells Fargo do sell real estate owned properties to homebuyers. Although some people believe banks sell foreclosed homes at a discount, they actually sell the homes for fair market value, which is the appraised value. As of 2015, Wells Fargo provides a property search page exclusively for real estate owned properties currently for sale, states the company’s website.