What Are REO/Bank Owned Properties?
Over the past several years buzz words in real estate have been REO, Bank owned, and short sale…Still many of us are confused about what all of these catch terms mean. Firstly an REO is an acronym which stands for Real Estate Owned and the term REO and Bank owned are synonymous. A bank owned property is a term used to indicate that the property is now owned by a bank. The bank who owns the asset is the one who foreclosed; defined as a process in which a lender retains legal ownership of a property through letters, legal notices and auctions due to a borrower/owners lack of payment and default on their mortgage. Once a bank repossesses a property they typically do not want to nor have the capacity to hold the property as theirs so they then list it on the open market to be sold in order to recoup their initial investment dollars.
What Are Short Sale Properties?
The term short sale means that a property is listed on the active market but is typically listed for less than what the borrower/owner owes their lender for it. In this situation, owners typically have permission from their lender to list the property at a price that is less than what is owed. Permission from the lender is typically granted when the borrower is in default or in distress and can no longer afford to make their monthly payments. Once a property is listed as a short sale the owner awaits an offer. When an offer is presented to them they can negotiate the contract much like any other offer/acceptance process and once their is a meeting of the minds between the buyer and the seller the offer along with the sellers extensive paperwork is submitted to their lender for their loss mitigation department to review. Through an extensive and often times time consuming process the short sale is approved and the natural course of a sales transaction can take place. Often times the term short sale can mean a long time from offer, acceptance to bank approval and closing so if you are a buyer who is considering looking at properties that are listed as short sales please be mindful of practicing patience throughout the process.