What's the difference between a Short Sale vs. a Bank-Owned REO?

A Short Sale is the sale of a home in which the seller's mortgage lender agrees to accept a payoff of less than the balance due on the loan(s). The process starts when a seller who is behind on their payments attempts to sell their home before the bank takes the property through foreclosure. To do this, the Real Estate agent negotiates with the bank to agree to sell the home for less than what is owned on the property.

REO stand for 'Real Estate Owned', and is another way to refer to a 'bank owned' property. This property that the bank has taken back through foreclosure and failed to sell at the trustee sale. These properties area also known as Bank 'Repos.'

With a Short Sale, the homeowner is still technincally the owner of the property and must agree to sale terms in addition to the bank approving the deal. In a short sale, the seller is typically living in the property and will issue all standard transfer disclosure statements.

Short Sales take much longer than REO to obtain an approval from the lender and to complete the escrow.With a Bank Owned REO, the bank is the owner and makes all decisions regarding the sale. They typically sell the property 'as is' and with minimal disclosures. REO properties are vacant and once a deal is agreed to, the sale take place quickly.

To dicuss the difference between a short sale or REO bank owned property, please contact us!

This article was provided by our affliate title company, California Title