Foreclosures, Short Sales, REO… The real estate market is full of confusing terms. With so much misinformation surrounding these terms, I want to update you on these distressed property types.
Short Sales have been all the rage lately, with sellers marketing properties at prices well below the rest of the market. Many people believe that short sales offer an opportunity for a good deal on real estate.
A short sale is the sale of a home for a price less than what the owner owes on the mortgage. The sale may close if the lender agrees to a “short” payoff in exchange for release of the bank’s lien on the property — hence the term.
REO stands for Real Estate Owned. It is a class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction (more on that below). If there are no interested bidders at auction, then the bank will legally repossess the property. Once the bank repossesses the property, it is listed on their books as REO – Real Estate Owned – and is categorized as an asset (non-performing).
As an REO, the bank will go through the process of selling the property on its own. It will remove some of the liens and other expenses on the home and sell it to the public. These can also be deals listed below the rest of the market (often in need of rehab).
Foreclosure is used when a power of sale clause exists in a mortgage or deed of trust in which the borrower pre-authorizes the sale of the property to pay off the balance on a loan in the event of owner’s default. The lender will attempt to sell the property at auction through a trustee, hence the term “Trustee Sale”.
There is typically a three month period between when a property goes into the foreclosure process and when the property is actually sold at a courthouse auction. During this period, the house is referred to as a "Pre-Foreclosure".
Auction buyers are required to have cash in hand on the courthouse steps. Because of this, foreclosures have often been limited to investors who can bring cash to the sale. Now, John L. Scott Foreclosures is making auctions available to home buyers and investors alike, providing the same experience you’ve come to expect from the industry leader, now in the foreclosure realm. There may be an opportunity for you to take advantage of the current market conditions and get a great deal at auction.
If you are interested in knowing more, please contact me at 206-713-3244, or email me.
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