What is the Difference Between a Short Sale, REO and Foreclosure Property?

Real Estate jargon can be confusing to the average real estate buyer purchasing a property in todays real estate market. Fortunately, Estes Park has relatively few distressed properties compared to the rest of the nation. However, we are not exempt from troubled properties and it is good for buyers and sellers to understand the real estate terms associated with these troubled properties.

Many buyers and sellers (and even some real estate agents) have trouble differentiating between a short sale, REO property and the different stages of the foreclosure process.

Short Sale

A Short Sale occurs when the seller of a property owes more than the property’s market value. A short sale requires bank approval to forgive the difference between the purchase price and the loan balance. Typically, short sales are not approved without proof of hardship to the seller causing the sale of the property. Bank approval for a short sale can take anywhere from 2 to 6 months to process.

Short Payoff

A Short Payoff occurs when the purchase price of a property is less than what is owed, however, the difference is not forgiven. A settlement is arranged for the seller to make up the difference to the bank through an unsecured loan.

Foreclosure

The foreclosure process is the process by which a bank takes title to the property as a result of non-payment of debt on the part of the property owner. The process begins when the bank serves the property owner with a Notice of Election and Demand. The bank then schedules a public auction to take place 110-125 days after recording the Notice of Election and Demand. Check out this web site for more information on the foreclosure process in Colorado.

REO Property

REO stands for “Real Estate Owned” and is the same thing as a bank owned property. The foreclosure process has run its course and the bank now owns the property.

Are you looking to purchase a distressed property in Estes Park? Contact me for an up to date “Distressed list” of bank owned homes, short sale properties and fixer uppers.

Photo Credit: Jeff Turner