Pre-Foreclosures, Shortsale and REO sales
Pre-Foreclosures, Shortsale and REO sales:
Pre-Foreclosures, Shortsale and REO sales are all a forms of distressed home sales which sell for cheaper than fair market value in the local market.
Pre-Foreclosure:
Pre-Foreclosures: A pre-foreclosure is a property with late mortgage payments, and the lender has issued a Notice of Default (in non-judicial foreclosure) or a lis pendens (in judicial foreclosure New York) to the borrower. The borrower can still make payments and pay the loan amount due to stop a foreclosure. But, if payments are not made, the lender will move to foreclose. In a Judicial State like New York, on average, it takes 1,000 one thousand days for a property to actually go to a foreclosure auction. If you come across an advertisement displaying pre-foreclosures those properties are not necessarily for sale. Especially Zillow, whenever a homeowner is 90 days late on a mortgage the properties are automatically put displayed on zillow as a “pre-foreclosure”, meanwhile the owner has no intention of selling the house.
Shortsales:
A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens’ full amounts and where the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency. Short sale agreements do not necessarily release borrowers from their obligations to repay any shortfalls on the loans, unless specifically agreed to between the parties. However, in California, legislation was passed to preclude deficiencies after a short sale is approved. The same is true of lenders on first loans and lenders on second loans — once the short sale is approved, no deficiencies are permitted after the short sale.
A short sale is often used as an alternative to foreclosure because it mitigates additional fees and costs to both the creditor and borrower. Both often result in a negative credit report against the property owner.
All short sales are sold “As-Is”, meaning the condition of the property will not be represented. Buyer can get an inspection at their own cost but seller or bank will not make any repairs.
REO Sales:
Real estate owned or REO is a class of property owned by a lender—typically a bank, government agency, or government loan insurer—after an unsuccessful sale at a foreclosure auction. A foreclosing beneficiary will typically set the opening bid at a foreclosure auction for at least the outstanding loan amount. If there are no bidders that are interested, then the beneficiary will legally repossess the property. This is commonly the case when the amount owed on the home is higher than the current market value of this foreclosure property, such as with a high loan-to-value mortgage following a real estate bubble. As soon as the beneficiary repossesses the property it is listed on their books as REO and categorized as an asset (non-performing asset).