Foreclosures and Short Sales
REO foreclosures are real estate owned properties that have been sent to foreclosure. When a property is listed as an REO foreclosure, the homeowner has defaulted on their mortgage. In this particular case, the property is taken back by the mortgage lender, usually a bank. Properties typically go into REO foreclosure when a buyer for the foreclosed home can not be found during a foreclosure sale at the court house steps. In this instance, the mortgager repossesses the property and turns around and sells it on its own. The bank will contact a local real estate professional to list the property for sale to the general public through the local multiple listing service.
Bank foreclosures are the result of a homeowner defaulting on a loan or mortgage they have received through a bank. When the homeowner can no longer make payments on their mortgage or follow the terms specified in the mortgage, the bank takes possession of the property, witch become a bank owned property. Once the bank owns the property they send it into foreclosure as a means to make back some or all of the money lent to the homeowner. Bank foreclosures, or bank owned homes, are sold at better rates then non foreclosed homes. The bank uses the proceeds to pay off the mortgage and any legal fees.Pre-Foreclosure or Short Sale
There is a period of time between when the mortgager goes into default and when the home is in foreclosure. This period of time is referred to as the pre-foreclosure period. During this period the homeowner can pay off the amount their mortgage is in default for during what is known as a grace period or they can sell the property in question to a third party and pay off the amount in default. Defaulted mortgages that are not paid off during the pre-foreclosure period are either sold at auction or taken into possession by the lender or lien holder.
Foreclosure Home Auctions
Foreclosure home auctions occur when the homeowner is in default and is unable to pay the amount in default by the end of the pre-foreclosure period. Once the home is no longer in possession by the owner the home is listed and sold at auction. The potential buyer who places the highest bid on the foreclosed home wins the auction. Foreclosure home auctions usually sell at cheaper rates then other foreclosed properties. Buyers are usually required to pay the winning bid in cash. Auctions eliminate dealings between the homeowner in default and any potential buyers.