Topic: REO vs. Short Sales
REO stands for "Real Estate Owned" by the bank. The bank will dictate to the Listing agent what the price shall be based on either an Appraisal or current BPO. A bank owned property is strictly sold AS-IS, nothing will be fixed; this is because the price is based on the current condition of the property. An REO property can be financed, unlike an Auction property where you would need to bid with a Cashier’s check. The draw back to buying a bank-owned property is that the bank knows nothing about the property and so, therefore, there are no Disclosures of condition and the buyer must do their due diligence and inspections (at buyers cost) until the buyer is satisfied. As a Realtor, I always recommend a whole house inspection, plus several other Inspections for rural properties. A bank is in the business of earning interest, not in selling homes… that’s why they are willing to liquidate their Assets the quickest way possible.
SHORT-SALE means the sale price is less than the amount owed; the lender allows you to sell short. That’s why the Seller must pre-qualify for their Hardship with the lender. Several kinds of hardships may qualify the seller, such as losing their job or being injured/disabled with no way to repay their loan timely. It can also be that your loan is resetting to a higher payment or you are going through a divorce, etc.
Why is a Short Sale a Good Idea? It is a win-win for the distressed seller and their lender. The lender is willing to do a short sale in order to avoid Attorney fees and other costs associated with foreclosure; the bank does not want the property to go into their REO inventory. The Seller is trying to save themselves from losing their house to a foreclosure. A short sale can preserve their credit from further damage by avoiding a foreclosure. A foreclosure is worse than a Bankruptcy on your credit file. It is to the Seller's advantage to cooperate in showing the property to prospective buyers. If they don’t’ ruin their credit with a foreclosure, I can help them repair their credit in order to get another home when they are back on their feet because, typically, the bank reports the loan as paid in full.
written by GINGER HOPP, Realtor - CFS ("Certified Foreclsoure Specialist")