Over the last two years, clients have approached me with the thought of purchasing a property which is advertised as a short sale, a foreclosure property or a Bank Real Estate Owned Property (known as an "REO"). The one thing you need with a Short Sale property and a Foreclosure is time.
A Short Sale is a property that is still owned by the Seller and the property is considered to have less value than the mortgage owed to the Bank. In order to purchase a property that is a short sale, you must obtain approval from the Seller, the bank with the 1st loan and possibly a bank holding a home equity loan on the property. Many times a buyer will get a great value in purchasing property sold by a short sale, however, it may take many weeks or months to accomplish. If you need to move by a certain date or sell your current home by a certain date this might not be the property for you to purchase, unless you are willing and able to find housing on a month to month lease until the Short Sale is approved, if it is approved and the offered price.
A property in foreclosure means that the Owner stopped making mortgage payments and the Bank has started a lawsuit to take the property back. A Lender may choose to go the foreclosure route instead of the short sale route if the Lender believes the property is worth more than the money owed to it. Foreclosure actions used to take between 6 to 9 months. In our current environment it can now take up to 2 years. The Courts will do everything in their legal power to keep the Homeowner in their home and all avenues must be exhausted before the Courts will allow the Lender/Bank to take the property. This is a long dragged out process and can be extremely frustrating.
A Real Estate Owned Property, is a property that a Bank has taken over either by Foreclosure or Deed. The Bank in this situation will close as soon as possible because they already have ownership of the property.
Nothing ventured, nothing gained but remember buying a property in foreclosure or advertised as a short sale it is a long dragged out process. You are taking the property "as is", without many of the standard representations.
Article Submitted by Attorney Felicia B. Watson