Playa Vista Home Sales Real Estate Blog

Short Sale vs. Bank Owned R.E.O. – 1.22.2010

A short sale is defined as a sales transaction in which the seller’s mortgage lender agrees to accept a payoff of less than the balance due on the loan.  There are typically at least three or more parties involved: the owner/seller, buyer, and lender(s).  All parties have to agree on the terms before escrow can open.  The short sale approval process is lengthy, sometimes taking one to six or more months.

R.E.O. stands for Real Estate Owned. An R.E.O. is a property, owned by a lender, usually a bank and after an unsuccessful sale at a foreclosure auction.  After a bank takes back a property, it will appraise the property for current market value and then go through the process of trying to sell the property on its own.  Real estate investors will often go after these properties since banks are not in the business of owning homes. In some cases, investors can purchase the house at a slight discount to its market value.

The following are some comparisons between REOs and Short Sale:

1)  Time frame – purchasing an REO property is much quicker than a short sale. An REO transaction is typically no difference than a standard sale.  There is an uncertain wait time for short sale due to the need for a lender’s approval. 

2)  Disclosures – Per law, the seller’s are required to list all disclosures to the best of their knowledge as to the condition of the short sale property.  Banks are often exempt from these state mandated disclosures, as they have no knowledge concerning the condition of the properties.

3)  AS-IS condition – For both short sale and REOs, buyers are expected to conduct his/her due diligence for the physical condition of the property and its surrounding.  Neither banks nor sellers of a short sale and REO will agree to any repairs.

4)  Clear title – In order for a title company to insurance a clear title, settlement and removal of all liens is mandatory prior to a transfer.  This is true for both short sale and REO properties as well.

I have helped many buyers and sellers in the purchase and sale of both short sale and REO properties.  I would be happy to share my insight and knowledge of current market practices and home values.  Just remember, if it is a nice home, in a nice area for a very good price, EVERYONE wants it.  People do not realize that, even in this market, we see fierce competition for the great deals.

I would be happy to speak to you with more detail, should you like more information on the topics discussed above, properties listed below, or more information about Playa Vista real estate.

Have a wonderful weekend!