“What’s the difference between a short sale and an REO?”
***ANSWER:
Great question.
Right now, there are basically 3 situations homes are in when they’re for sale: standard, short sale, & REO.
By “standard”, I mean your typical situation where Mr. & Mrs. Smith are selling a home. Nothing unusual about it.
A short sale is when the owner’s loan balance is so high that selling the home won’t net enough to pay off the mortgage. So the home is for sale subject to getting the bank’s approval of taking less than what is owed. Banks aren’t exactly thrilled to comply, and will take 2-12 weeks to respond. Often that response includes the bank requiring the buyer to raise their offer significantly (even OVER the list price.) My guess is one of every 3 or 4 short sale homes every actually close. For that reason, we generally don’t advise our homebuyer-clients to pursue short sales.
An REO (Real Estate Owned by a bank) is another matter entirely. The bank has foreclosed and already owns the home and wants to get it off their books. While not lightning fast, they generally respond to an offer in 1-3 business days
We’ve had tremendous success with our clients buying foreclosures…and at best mixed success with short sales.
