Whether you’re a home buyer or a real estate investor who’s just getting started, it’s important to understand the differences between a short sale and a REO. The timeframe and process for buying a REO and buying a short sale property do differ, so it’s vital that buyers understand these key differences. The differences between a REO and short sale is exactly what Kristine Zelazo, the Short Sale Gal, will explore in today’s article.
What are REO Home Sales?
A REO (Real Estate Owned) property is one that is owned by the bank or lender. The bank typically acquires the home as the result of a foreclosure.
In the case of REO home sales, the property not usually occupied by a current resident, so this is an important consideration, as these bank owned homes tend to be targeted by thieves, vandals and even squatters. Some homes may fall into disrepair or suffer from issues due to being vacant for an extended period of time. In other cases, a former homeowner may intentionally damage the property prior to leaving.
So the home must be checked thoroughly and monitored on a regular basis to ensure it remains intact and in good condition. A pre-closing inspection is extra important, as you never know when thieves, vandals or squatters could strike.
What’s the Timeframe for REO Home Sales?
The timeframe for buying a REO property is generally a bit faster than a short sale, since there’s no review process. The bank owns the home outright, so the actual sale is quite similar to a traditional sale in terms of the timeframe, although it may be a slight bit longer if the lender has a limited staff to deal with a large number of home sales at a particular point in time.
In terms of pricing, the lender has generally taken a significant loss on the property so they are generally not likely to list the home at a price that’s far below the going market value for the property. Since they’ve already taken a loss on the home, they may not be too open to negotiation.
What’s a Short Sale?
A short sale involves the sale of a home for a price that’s less than what’s owed on the homeowner’s mortgage loan(s) on the property.
A short sale is performed in the case of a distressed property whereby the homeowner can no longer afford to pay their mortgage.
In the case of a short sale, the bank must approve all offers in order for the sale to move forward to closing. This offer review process can be rather time consuming, although new laws have accelerated the process significantly.
Compared to a REO where the bank has already suffered a loss on the property, short sales allow the lender to recoup a fair amount of the money owed on the property, thereby avoiding a significant loss. In fact, the bank could still turn a profit depending upon how much was paid on the mortgage and how long they held the mortgage (interest accounts for a significant portion of a mortgage loan, so it’s theoretically possible for the bank to recoup more than they lent the borrower in cases where the mortgage was held for a significant period of time.)
In addition, new legislation allows homeowners who opt for a short sale to enjoy significant tax benefits.
A short sale property is more likely to remain occupied during the sale process, which decreases the chances of third party vandalism, theft and squatting.
Trust the Short Sale Gal Kristine Zelazo for Help with REO Home Sales and Short Sales
There are a number of unique steps and processes involved in REO home sales or when going through a short sale instead of a traditional real estate transaction. You’ll have lots of advantages in this regard when you work with a short sale expert like Kristine Zelazo, better known as The Short Sale Gal — and that includes a faster sale!
If you’re seeking to sell your home as-is to an investor or wish to pursue a short sale transaction for the sale of your property, turn to Kristine Zelazo, the Short Sale Gal!
To get started, simply complete the home pre-sale form to provide Kristine with additional information on the property in question. Questions? Call 800.664.0616, x802.