Home Buying in Canoga Park>Question Details

Misty, Home Buyer in Canoga Park, CA

Can u pls explain diff/ between preforeclosure, foreclosure, REO, short sale & bank owned?

Asked by Misty, Canoga Park, CA Sun Jun 28, 2009

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Shel-lee Davis - BRE #01817412’s answer
Misty:

There are many posts on this subject in this forum on this subject and you could search for them. Here is a short version of the definitions.

Preforeclosure - Before foreclosure - the homeowner is late on his payments and the bank is starting the process of exercising their collection rights. Preforeclosure actually starts the minute a homeowner defaults on their mortgage payments, long before the Notice of Default (NOD) is filed, but most people don't give it this title until the bank has actually files the NOD. During this period the homeowner can negotiate with the bank to stop the foreclosure process, get a loan mod, refinance, pay the delinquent amount, negotiate forebearance, sell their home, etc. (owners rights and remedies) It is a time of choices and will last at least 121 days in California.

Foreclosure - Some people begin to refer to a home as "in foreclosure" when the Notice of Trustee Sale (NTS) is filed. This is a 21 day notice that the bank intends to sell the home on the courthouse steps at a Trustee Sale or Auction. Up until 5 days before the auction the owner can still exercise any and all of their rights and remedies. Mnay people use the term forclosure for the entire 121 day period (and technically this is correct). Some people don't use the term foreclosure until after the Trustee Sale (which is technically wrong). Many people use the term to refer to the home once it is bank owned.

REO - stands for real estate owned. This is a home which is owned by the bank who acquired it through foreclosure.

Short sale - This is simply the sale of a home for less than the amount owed the bank. Some of these homes are in pre-foreclosure and some are not. Also note, not ALL homes in preforeclosure and which are listed for sale are short sales (although some realtors will tell you differently). The homeowner is selling this home, however, the lender must approve receiving the sales price as payment in full on the outstanding mortgage loan. The short sale process is NOT short. It can take 60 - 180 days to get the bank to approve taking less than they are owed.

Bank owned - the same as REO, and for some people the same as foreclosure.

Hope that helps. You can look at some of the other post on Trulia (including my own) for more information on this subject, or you can contact me directly through my profile. Dare to Dream.

Shel-lee Davis
Real Estate Consultant
RE/MAX Palos Verdes Realty
http://shel-lee.listingbook.com
2 votes Thank Flag Link Sun Jun 28, 2009
Hi, Misty. The agents below gave some good answers. If you still have questions please let me know! I will be happy to answer them.

Happy househunting!

All my best,
Dot Chance
Web Reference: http://www.DotChance.com
0 votes Thank Flag Link Sun Jun 28, 2009
Very good answer from Shel-lee. Here's the even shorter version, with a few comments from the home buyer perspective (since you indicate that you're a home buyer).

Preforeclosure: An owner has fallen behind on his/her mortgage payments. If the situation isn't corrected, it ultimately will result in a foreclosure. Buyer Perspective: You can buy the house directly from the seller. You can either pay: (1) the full amount owed (mortgage, penalties, interest, etc.) or (2) you can pay less than is owed by attempting a short sale. See below.

Foreclosure: An owner has been foreclosed upon. The lender owns the house. You'd buy the property through a Realtor, since foreclosures are put on the market through agent. The listed price may or may not be a good value (it often is). If the property doesn't sell within a set time frame (often 45-60 days), the lender often will reduce the price. You can make an offer for more than, the same as, or less than the listed price.

REO: Same as a foreclosure. REO means "real estate owned"--owned by a bank or lender.

Short Sale: An offer to an owner to buy his/her property for less than is owed on it. You're buying from the individual owner. However, the sale is contingent upon approval by the lender. Because the lender is the one taking the loss, it has the power to say "yes" or "no." As a buyer, you make an offer directly to the seller. However, the seller has to provide a lot of information to the bank to justify the short sale. From the buyer's perspective, short sales can be tedious, frustrating, and often unsuccessful.

Bank Owned: Same as "foreclosure" or "REO."

Hope that helps.
0 votes Thank Flag Link Sun Jun 28, 2009
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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