Short Sale, REO, Foreclosure Purchases

June 29, 2009
Matt Isleib

 

The terms short sale, distressed sale, foreclosure sale and REO sale all have different meanings. When you are in the market to purchase a home these days you will come across these terms and these types of sales and it is important to understand the difference between them.

·         SHORT SALE:   Is a bank approved transaction to sell the property for less than what is presently owed on the home. The current owners are presently in foreclosure or are underwater on the mortgage and are trying to sell the home to avoid the foreclosure auction. Putting in an offer to purchase a home would have to be approved by the bank. The time frame around this type of transaction is anywhere from 2-6 months depending on the bank. It is the most difficult of the four types to get done.

·         DISTRESSED SALE:  Is basically any reason that the seller needs to sell and fast. Distressed sales are typically priced below the market to sell quickly and would constitute a divorce situation, estate sale, a death, re-location etc.

·         FORECLOSURE:  If you are buying a foreclosure you are at auction bidding on a home. You will need to have “certified funds” in an amount that will be determined by the trustee. You will have thirty days from the acceptance of your offer to close and typically sales are “as-is”.

·         REO:  Is the term used for a bank owned property. The bank or lender has already gone through the foreclosure process and the home may not have sold at auction or they may have decided not to auction the home and list it for sale instead. This type of purchase will more than likely be “as-is” as well, meaning if there are repairs that need to be made there will be no repairs made by the bank. You need to make sure that there are no outstanding issues with the home that you are looking at. If there are repairs that need to be made it may mean that financing will be difficult to obtain so find these things out ahead of time.