Short-Sales, Foreclosures, Bank-Owned, HUD-Owned Distressed Properties Listed For Sale
The term "short sale" indicates that a property for sale will be subject to the lender accepting less than is owed on the loan. as the total indebtedness exceeds the current market value. Thus the homeowner is offering the property for sale subject to the lenders approval, as the lender must agree to accept less than is owed for the sale to be completed.
In addition to the outstanding loans, some properties in this category have also become "nonperforming," meaning that the borrower has stopped making payments. Thus the total due at closing includes back payments, penalties, possibly delinquent property taxes, unpaid homeowner association dues, etc. These costs plus escrow and title fees, selling commissions and other closing costs must be paid to allow the sale to proceed to completion. Anyone in the transaction can assume these costs (the buyer, seller or lender) to facilitate the sale. This becomes the subject of negotiation.
For more information on short sales and other distressed property types or for help in dealing with one call
|REO stands for "real estate owned," signifying that the property is owned by the lender. |
Thus, such properties have already gone through the foreclosure process and there are
established price and terms for a purchase. Buyers can treat those properties in much the same way as other non-distressed properties with the following differences. The owner/lender in REO sales did not occupy the property. Therefore the lender is not required to provide some of the normal disclosures to buyers of the property. Most notable is the lack of a Transfer Disclosure Statement which in normal situations advises buyers of conditions known to an owner such as past repairs.
Agents involved in the transaction still must do their walk-throughs to report to the buyer in writing any observed defects and "red flags" and other required disclosures are also provided, such as the Natural Hazard Disclosure and report.