I had a friend say “What does REO mean? I’d like to know!” And it dawned on me that I needed a Glossary for real estate terms related to distressed properties:
Short-Sale: A short sale is when the mortgage company agrees to accept a mortgage payoff that is LESS than the current loan balance (sometimes, but not always, between $20-$100k). Here, the seller/homeowner is still involved in the process of finding an agent and trying to sell their house for as much as they can.
Foreclosure Auction: An auction takes place when the bank has taken possession from the defaulting sellers, and places the home up for bids – beginning at the loan balance, interest, fees, and any liens associated with the property.
When/if this is unsuccessful…
Real Estate Owned (REO): After an unsuccessful auction, the property will revert back to possession of the bank, at which time they “own” the property and place it up for sale. Sorry, no speedwagon here!
In my experience, you can’t say any sort of definites about any of these processes. Some REO properties can take months to get a contract, or even close, while some can take a few days. There’s no guarantee, since every Bank is different and they each have different processes.
Laura,
Much thanks for your explaination.
Regarding REO’s, is the bank under any obligation to take the larger offer?
Reason being I made an offer on a property which the bank declined. My offer which was higher than what the bank was asking. The verbal explaination was that the bank was negotiating with a party who made a lower offer than mine.
TiA
Ben,
Here’s the short version: the bank can do whatever they feel like doing. Since I don’t know the particulars about your offer, there was probably something the bank felt was more advantageous with the other offer: either no home inspection, a shorter close, a bigger net, or they feared the property wouldn’t appraise for the value of your contract.
Sometimes banks just want to get rid of a house, so if they see a contract with a shorter time period to close, and fewer contingencies, they’ll jump on it!
I’m sorry your contract didn’t work out..but I always tell my clients, something else and something BETTER will come along! On to the next one!
Hope that helped,
Laura
I was wondering the term that banks owned the property, a lot of places just said that bank owns/hold it. When it comes to bank owned properties (REO’s) the banks want to get them off their hands and get what they can for the property but not lost money at the same time as they have lost enough from the first buyer.