I felt this was a timely question to answer (more so a year ago). I will tell you the big differences between Short Sales and REO properties. Also, if you are in this situation, or are looking to buy a short sale or REO property, follow the link posted below.
A Short Sale is basically a pre-foreclosure stage. Once the homeowner realizes they cannot support their monthly payments, they attempt to sell it on the market using a real estate agent at current market value. Note: the current market value of their home is lower than their mortgage, so their “upside down” on their mortgage. The process is complicated but it has some benefits:
- A Short sale is usually less damaging than a foreclosure on your credit. (Foreclosures stay on your credit for 7 years, making it very hard to purchase a home or obtain another loan.
- There are no deficiency judgments on a short sale. A deficiency judgment is when the bank tries to make up its losses after you foreclose on your house, like collections agency would on unpaid bills.
- The bank realizes that some money is better than no money (unlike with a foreclosure).
- From the buyers’ perspective, buying a short sale, while it may take 6 months, is worth it when you can buy a house that is generally worth more in the long run.
And Short Sales have some negatives too:
- Short sales are a notoriously lengthy process. Some short sales can take as little as a month, but can take as long as 11 months!
- After a buyer makes an offer, the bank may not accept the offer, lengthening the buying process.
An REO property stands for Real Estate Owned. It’s a property that has already been through foreclosure and has failed to sell at a foreclosure auction. The bank now owns it and allows a real estate agent to list their house. The bank usually cleans the house of any debris, which is different from a foreclosure, which may have all of the previous owner’s possessions that were left. Also, REO’s typically take a couple of weeks to close the transaction, which is far better than waiting for a bank to approve a short sale.
If you need to sell your house, but are afraid you may owe more than the house is worth, contact me, and I’ll see if I can help you.
Also, contact me if you are interested in buying short sale or REO properties in Kansas or Missouri, I can easily find properties that fit your criteria and find you a great deal!