Short Sale
When seller tries to sell a property before being foreclosed on, and the proceeds of that sale fall short of the amount the seller owes to the lending institution. Seller may negotiate with their lender to accept an amount less than what is actually owed, leaving the balance either being forgiven or carried forward and still owed by seller to the lender.

Foreclosure
When a homeowner stops making payments to their lender, the lender will seize the property and attempt to sell it at a foreclosure auction. If the property is not successfully auctioned off, it then becomes a bank owned, or REO (Real Estate Owned).

There are some important items to remember when buying a foreclosed property at auction:

• The minimum bid includes the loan balance, accrued interest, legal and foreclosure fees and costs.

• Winner must be prepared to pay in full by cashier’s check.

• Foreclosed property must be accepted in “as is” condition and may include still having tenants on the premises and liens against the property.

Bank Owned
Also known as Real Estate Owned (REO). Once the lender has attempted and failed to auction off the property during foreclosure, it becomes the bank’s property. They will handle evictions if needed to remove tenants from the property, work with the IRS to remove tax liens and make repairs to the property if they choose to. If you purchase an REO property, you will receive a title insurance policy and have the ability to investigate the property.

When buying a REO, have your agent contact the listing agent and ask:

• To review any inspection reports, if any.

• Has the bank agreed to or have they done any repairs?

• Are there special instructions from the bank on how to present the offer?

• What is the turn around time it takes for the bank to accept an offer

If you make an offer, make sure to include any inspections you would like to do (at your expense) and any contingencies for the sale of the property.

Keep in mind that banks generally will present a counter offer to you and that many REO properties sell close to full market value.