Are you wondering what a foreclosure or a short sale is? In the United States, owners sometimes face difficult situations that make them unable to make their monthly mortgage payments, which forces the banks to seize their property.
A short sale means that the sales price of a property will be lower than the mortgage balances owed by the owner. When a property owner is not able to pay the full mortgage balance, they must prove that they carry too much debt and that they are not financially able to cover the whole amount. As soon as the request is approved, the bank must send a professional appraiser in order to estimate the value of the property and set a selling price.
All offers made to the owner must go through the bank. If the bank refuses the offer, the negotiation process could take several more months.
“As a potential buyer, short sales can constitute a very good deal. However, the buying process can be very long or may never go forward.”
Foreclosures and REO – Real Estate Owned
When property owners are not able to make their monthly mortgage payments or when they haven’t decided to opt for a short sale, their lending bank can seize the property.
When the bank has estimated the value of a property, it can choose to put it up for auction. If this doesn’t succeed, the bank takes possession of the property and lists it as Real Estate Owned – REO.
“Since the bank now owns the REO property, transactions are smoother and faster, as opposed to a short sale.”