What’s the difference between short sales, foreclosures, and real estate owned sales (REOs)?
To answer that question, let’s start by explaining short sales. These happen when you sell your home for less than what you currently owe your bank. In this case, the bank has to agree to take a loss on your property in order for you to sell. Of each of these home sale options, this one is the most beneficial to sellers.
While you won’t get any money from a short sale, you will be able to buy another home in a relatively short period of time (usually two to three years) after it’s over with hardly any repercussions.
If you sell your home via foreclosure, you’ll have to wait at least seven years after that sale is removed from your credit report. You can technically buy again before that, but the interest rates and terms will be pretty ugly, so you’re better off trying for a short sale instead of letting your home go to foreclosure.
“You’re better off trying for a short sale instead of letting your home go to foreclosure.”
If you’re buying a foreclosure home, the bank usually has a trustee sale for the property through an auction, so you’ll have to bring the home’s sale price in cash the day of the auction in order to buy it. This makes foreclosure homes much easier for investors to purchase. Foreclosures also include premiums for whoever handles the auction, and these fees typically aren’t included in your loan.
An REO sale means the bank took the home and tried to auction it off, but it didn’t work, so now they have to sell it conventionally through the market. In this situation, the transfer and recordation taxes that are normally split between the buyer and seller are now solely the responsibility of the buyer, which can significantly impact the cash-out-of-pocket amount you pay.
If you have any more questions about any of these types of sales or you have any other real estate needs I can take care of, don’t hesitate to reach out to me. I’d love to help you.