Someone explain it in easy to understand terms!
What is a short sale?
A short sale occurs when the borrower (homeowner) is no longer able to make their mortgage payment and owes more on their home loan than what the home is worth on the current market. The homeowner will list their home with a Realtor for the current market value and the lender will take less for the home than the amount of the borrower’s loan. When making an offer on a short sale, the seller is still involved in the process and will have to accept the offer as well. Once the offer is accepted by the homeowner, the offer will then need to be approved and accepted by the bank (lender).
Short sales, in most circumstances, are the first step to avoid foreclosure. Short sales are very complicated and the outcome is not guaranteed.. The bank (lender) is not obligated to take a short sale and in most cases the process to get one approved can be very time consuming. A typical short sale can take anywhere from three to six months to close, but this varies case by case.
What is a foreclosure?
Foreclosure is what happens when the lender takes possession of the property.
When a home owner fails to make the payments on his/her mortgage and has not exercised other options, such as a short sale, the lender can begin foreclosure proceedings. When the lender takes possession of the house, the homeowner is no longer a party in the sale, as they would be in a short sale situation.
Foreclosures are NOT sold by Realtors. Foreclosures properties are auctioned at a Trustee Sale at the Court House in the County where the property resides. Foreclosure properties must be paid in full, with a cashier’s check at the time of the auction. We suggest that buyers should be experienced investors when considering buying a foreclosure property.
Some of the problems that can occur when buying a foreclosure can be: title problems, superior loan pay offs, IRS liens, tenants or owners still occupying the property who won’t leave and/or structural problems with the property. The price may seem good at the auction, priced well below similar properties in the area, but your costs and risks may come after you try to take title. This can be a very risky way to purchase property if you do not have experience in doing so.
What is an REO?
REO stands for Real Estate Owned Property. An REO is sometimes called Bank Owned . An REO is different from a foreclosure property in that the bank tried to sell it at a foreclosure auction and was not successful in getting bids. The Bank then becomes the owner of the property because the property was not sold at the court house.
The bank will hire a Realtor to list the property for sale. In order to list the property for sale as an REO there are often a number of tasks that need to be done before the listing can go “active” on the market. Depending on the property and its condition, the bank may need to evict the current tenants, clean, remove rubbish, and more. This is one advantage of buying an REO rather than a foreclosure property.
When making an offer on an REO property your Realtor is submitting the offer to the bank (lender) and it will need to be accepted by the bank. Unlike short sales, the wait time on an REO offer is anywhere from 72 hours to a week or so but this can vary.
For more information call Horizon real Estate at 1-800-995-2411 and we will happily answer any questions or email your questions to dave@horizonrealestatesales.com.