Jan 26 2009
Buying a REO or short sale
What's the difference between a REO, foreclosure and short sale? I am going to start looking for a home to purchase and would like to know what to target.
An REO is a bank-owned home (Real Estate Owned), basically a foreclosed home. A short sale is still owned by a private party who is trying to sell the home with bank's approval to settle for less than the debt on the home.
Honestly, the best choice for a first-time buyer is a normal sale. The hype involved with getting a "great deal" on a foreclosure is a sales pitch. If you have a contractor in the family or cash to burn, rehabbing one of these REOs may be a good investment. But buying either a bank-owned property or a short sale often limits your ability to inspect the home and obtain background info. Furthermore, the bank will set the terms either way, usually it's as-is without any perks or negotiations in favor of the buyer.
Another item to consider is your lender's requirements. If you are buying with cash, no problem! If you are trying to go with FHA or other lender, many REOs will not qualify due to the poor condition they have been left in.
Look around and compare the overall condition of some foreclosures, short sales, and "normal" sales and make sure you're equipped to take on the possibilities involved before you decide to focus your search.
