I’ve been looking at a lot of bank owned property lately. Why? you ask? Well, for one thing, there are A LOT more of them these days. We don’t really have a way in our MLS system to differentiate between Bank Owned, Short Sale or regular, old fashioned sellers – I hear that some of my peers in other parts of the country can do that. Anyway, as I’ve written before about short sales, I generally try to stay away from those types of sales feeling that it really isn’t the best situation in which to represent a buyer.
Short Sales in a Nutshell
So, back on target, what’s the difference? Short sale is the process a homeowner attempts to go through to prevent foreclosure. It’s where they ask the lender to forgive the debt and allows them to sell the property for less than what is owed. The sale is approved by the lender (or lenders if there are two), thus you’ll often see the phrase “subject to 3rd party approval” in the listing.
In these situations, the property owners are still living in the property – they’re not always happy about their situation and they can sometimes take out their frustration on the property. When purchasing a short sale, you accept it in the condition it’s in AS OF SETTLEMENT. Along with the other shortcomings listed out in my previous post, it just boils down to a huge amount of risk and time on the buyer’s part.
REO – Real Estate Owned
How about REO – what is that? REO stands for Real Estate Owned. These are properties that have already been foreclosed on, so the bank is now the owner/seller. The occupants are somehow removed from the picture, but sometimes they leave their stuff behind – sometimes LOTS of stuff. The bank now wants to sell the property hoping for fair market value. However, sometimes, due to the behavior described above, the properties are distressed and there are deals to be made.
Generally when purchasing REO, you still give up many of your rights as a buyer, but it’s a much faster process and the property condition/situation is more controlled. Generally they will allow an inspection but are less interested in dealing with credits or any repairs.
Here are some photos from an REO property I saw last night with a client. It’s so sad to see some of these properties and the condition they’ve deteriorated to.
This is a shed that was to be built out back – the washer/dryer are in there although I’d bet they are not working. Next to them is a sink base w/cabinets. It’s funny that there is a door on the structure, but sad.
This is what the rest of the back yard looks like – furniture, trash, clothing, food, construction materials, etc… What a mess.
So, sometimes REO can be a good deal IF the bank is aware of what they’ve got and if the buyer is prepared to deal with it!
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