Short Sales and REOs: What’s The Difference?

"The troubled real estate market has led to an influx of distressed homes, which now make up as much as half of the inventory in some areas. Thanks to the attractive prices being offered, many buyers are snapping up homes they would otherwise not have considered. Unfortunately, not many of them really understand what they’re getting into. For instance, what’s the difference between a short sale and an REO—the two most popular types of distressed homes today? Here’s a quick guide to help you better understand your choices.



Short Sales and REOs

A bank short sale is a home that’s priced below the seller’s mortgage balance, because the balance exceeds its current market value. Banks agree to short sales because the only alternative is often foreclosure, which will cost them even more. REOs, which stand for real estate-owned, are homes that have gone into foreclosure but have been repossessed by the bank because they failed to get bids at the auction. Both are sold at significant cuts and are listed on the MLS just like non-distressed homes.

Selling Prices

A short sale is limited by the seller’s outstanding balance; it cannot be priced more than what is owed. Generally, a bank short sale sells for 85% to 95% of the market value, although some can sell for as low as 60%. REOs are priced according to market values as well, but banks can also take into account any repairs they’ve made prior to listing. Since banks sell REOs solely to get the property off their books, they are priced to sell fast and often offer good deals compared to a bank short sale.

Buying Process


This is probably the biggest difference between an REO and a short sale. In a short sale, the buyer makes an offer to the seller, but it’s forwarded for the bank for approval. The lender has the final word on whether or not the bank short sale can push through. An REO, on the other hand, is sold much like a regular sale, with the bank acting as the seller. They usually take faster because the bank is much more willing to sell.
Where To Find Homes


One can find a bank short sale or REO on the MLS and other mainstream listings, but they can be hard to distinguish from regular homes. Laws have yet to be passed requiring the identification of short sales and REOs. Until then, the best way to find a bank short sale is to look for wording that says a “third party,” meaning the bank, has to approve your offer. REOs can also be found in banks’ private listings, which are usually available on their websites."

Avoid-foreclosure..... Do a short sale..!

Short sales are the hottest thing going in the distressed-property market, and the trend is expected to get even hotter in coming weeks. While a short sale may sound appealing, it's important to understand what a short sale is, how it works and how it can affect your income and tax liability. If you do not understand the process, it could end up costing you a considerable amount of money. A short sale is a complex process, so it's best to work with a professional such as shortsalesafe.com.

If you are facing a debilitating adjustable rate mortgage interest rate increase, you are not alone. In fact, you are among the hundreds of thousands of residents who are in the same situation. If you are unable to continue paying your mortgage payments, you only have a few financial options available to resolve the situation for you and your family. You can attempt to negotiate for a loan modification, reducing your monthly financial obligation. In the event that you can still not make the mortgage payments, you can list your home for sale

A short sale is one of the many ways in which a home owner is able to prevent himself and his property from going into foreclosure. A short sale is a far less expensive process than a foreclosure and it also takes much less time to complete. Buyers of property in short sales will typically negotiate with lenders and lien holders to pay them the debt owed at discounted cost.

Therefore, if you are a buyer who plans to engage into a short sale, it would be wise to ask the opinion of a real estate short sale professional like us. We can provide you with a complete explanation of short sale and how the process works. In this way, you can be prepared to gather all the needed data to accomplish the transaction and move into your new house.