A distressed property normally is associated with the foreclosure process. Distressed properties are on the rise in my market area of Sussex County, NJ. They're not limited to this region plus experts predict we'll ALL be living with them for quite some time to come.
So, let's get comfortable with Short Sales and REOs.
When the owners are behind in mortgage payments and cannot catch up, they may try to sell the property for less than they owe on it. As an alternative to foreclosure, many banks will "forgive" the shortfall between the debt and the sale price. These are commonly known as Short Sales or pre-foreclosures.
The other common type is when a foreclosure or a deed-in-lieu-of foreclosure has occurred. I'll use the term bank but the new owner also could be a mortgage company, corporation or debt collector. The bank is now the deeded owner of the property, usually called an REO for real-estate-owned. The initials are normally spelled out R-E-O although some people say it as a word for like the Brazilian city, Rio de Janeiro.
Many buyers and agents lump all distressed properties into the same "it takes months to get an answer" category. Based on my very extensive work - and training - with pre-foreclosure and foreclosed real estate in Sussex County, NJ, I can dispel some myths and clarify some issues for you.
Many folks confuse Short Sales and REOs. These are very different animals. Let me elaborate in a little series of postings...
- Part 1 - Distressed Properties are NOT Black Holes!
- Part 2 - Short Sales can be a great thing despite Timeframe & Lowballs
- Part 3 - So You Want a Foreclosure: Bank-owned Properties - REOs
- Part 4 - Want to Steal a Foreclosure? Get the REO facts.
- Part 5 - Consider a Foreclosure - Advantages of REOs
- Part 6 - Pitfalls of Foreclosures. Disadvantages of REOs for Buyers
