Foreclosure, Short Sale, or REO—Purchase property in any of these three steps.
Listed at $1,249,999 (MLS# 347709) Wailea, HI. 5 bed/4 bath $759K (MLS# 347437) Kihei, HI.
Listed at $695,000 (MLS# 346288) 2+ acres in Haiku, HI.
What’s the Difference Between a Foreclosure, Short Sale, and REO?
“Foreclosure” is the process by which lender(s)/lien holder(s) take possession of a property as a result of the current owner’s failure to make mortgage payments over a certain period of time. Specific procedures render termination of mortgagor’s equitable right of redemption. This process could take years if contested, and not all states share the same laws and procedures regarding foreclosures.
Prior to the infamous and unwelcome eviction after foreclosure, a bank will offer Cash for Keys (CFK) to the current resident(s) as an incentive, and to lighten the financial blow of the move. Depending on the individual’s circumstances and the particular state laws, there are all types of scenarios played out in the final eviction process. Good idea to accept the CFK which is not cash at all, but a check, given on the date the current resident vacates the property. The expectations of the bank in giving the CFK are that the premises of the property are left damage free and broom clean.
“Short Sale” is the sale of real estate property for less than the current mortgage owed to the lender/lien holder, hence the term, selling it short. Short sales often occur when a hardship arises and the borrower cannot pay their mortgage loan. This process is NOT for the fainthearted nor lackadaisical, as the road is paved with a myriad of paper work, research, and negotiations. However, this is by far a more humane road for sellers to travel, and usually yields a quicker recovery on their credit report.
In the end, the short sale’s final agreement does not necessarily release the borrower from their obligation to pay the remaining balance of the loan, known as the deficiency—nor does it eliminate seller from the infamous 1099 for the amount the purchase fell short of paying off the mortgage. These items are taken into consideration and negotiated by the real estate agent handling the transaction. Although, all final decisions are decided by the lien holder(s) and all debt has the potential to be released. Consult your accountant, or attorney prior to making a decision to sell your home as a short sale.
A “Bank Owned” property is the same as an “REO” acronym for Real Estate Owned. REO is property owned by the lender—usually a bank—after an unsuccessful sale at a foreclosure auction. Most REO properties are worth less than the total amount owed to the bank.
Prior to the foreclosure proceedings and auction, this property could have been listed on the market as a short sale where there were no offers, or the final offer did not make it through escrow to closing. Following an unsuccessful sale at an auction, the lender/bank will go through the process of selling the property on their own, most of the time enlisting an REO Agent like myself. Also, be sure to check out my Maui Short Sale and Foreclosure gallery.
Go forth and conquer!
Our offices are working upwards of 30 pre-foreclosures (properties not listed in the MLS) at any given time. To protect homeowners, or tenants currently still living in bank owned properties, and because of MLS rules, we are unable to give out addresses of our unlisted pre-foreclosures.
However, as bank owned properties are able to be listed on the MLS, and if you answer a few questions below, we can contact you first when a property of your dreams is about to be listed. Also, be sure to check out my previous blogs.
Please call or send me this information:
- Assets you desire in a property. (i.e. acreage with a house and cottage, condo, 3 bed/2 bath, swimming pool, vacation rental on the golf course, etc.)
- Pre-approval letter or proof of cash. I would be happy to send you names of loan officers, so that you can be pre-approved and ready to make an offer.
- Preferred location (i.e. W. Maui, S. Maui, or an actual town such as Haiku, Wailuku, Kahului, Kapalua, Kihei, Wailea, or a zip code).
- Phone number, name, and email address.
Kathleen Wilson, SSCP – Short Sale Certified Professional – Five Star Institute, RECP – REO Certified Professional – Five Star Institute, and SFR – Short Sale Foreclosure Resource