Differences between a Short Sale and a REO (Real Estate Owned)
What is a REO?
REO (real estate owned) also known as “bank owned properties”, are typically properties owned by a bank, government agency or government loan insurer, after an unsuccessful sale at a foreclosure auction. The bank will then go through the process of trying to sell the property on its own. It will try to remove some of the liens
and other expenses on the home, and then try to sell it through the use of real estate agents that specialize in REO properties.
What is a Short Sale?
Short sales are properties available at a purchase price that is less than the amount owed by the existing owner. This is typically an alternative chosen by homeowners who can no longer afford to keep mortgage payments current. In many cases is a better alternative to bankruptcy or foreclosure proceedings. A lender approval is required where the lender agrees to accept a discounted amount -less than the total amount due on the mortgage. The bank may choose to perform a short sale in hopes of avoiding or mitigating an impending loss.
The requirements vary from lender to lender and from state to state. In general, the following are typical differences between the two: