Foreclosures, REOs and Short Sales, Oh My!

When I think of foreclosures, short sales and real-estate-owned (REOs) homes for sale my mind immediately shifts to the tune, "Lions and tigers and bears, oh, my!"

These distressed properties are almost irresistible creatures to today’s real estate buyer.  If you are considering purchasing or investing in a distressed property you should always approached the transaction with a heightened sense of caution, a great deal of patience and the guidance of an expert. Here is some basic information to start you on this brick road of investment opportunities.

What is a Foreclosure Property?

A foreclosure property is a home in foreclosure.   It means the owner has stopped making mortgage payments and the lender has given notice that unless all outstanding payments and penalties are paid, it will sell the property to the highest bidder at auction.

Home buyers see benefit in purchasing foreclosures because they can often buy the property for the amount owed, picking up the home owner's equity for free.

What is a Short Sale Property

With a short sale, a lender must agree to accept less than the amount owed on the property. A short sale happens when a homeowner is very close to or in foreclosure but before, the property goes to auction.

Buyers typically purchase the home for less then what is owed on the home because investors are not paying off the existing loan or making up the back payments. The buyers are striking a deal with the existing lender to take less than what the lender has coming to avoid dealing with a foreclosure.

What are REOs (Real Estate Owned)?

Banks end up owning properties when no one at the auction bids high enough to cover the amount owed against the home.

• Buying an REO is similar to buying a short sale except the lender through a foreclosure action acquired the property.
• Lenders will often sell repossessed homes for less than the past loan balance.
• REOs are bank-owned properties, meaning Real Estate Owned by the lender.