As if the language of real estate weren’t confusing enough, the wave of bad lending practices and loan defaults of recent years have added more terms that have subtle but important shades of difference. When you prepare to speak with a Realtor about buying or selling, make sure you understand the lingo.
First, it’s important to know that the word “foreclosure” does not describe a property, but the legal process by which a homeowner loses his or her interest and the bank or lender assumes ownership. It’s a legal term, not a property description.
So, if you’re buyer, you may be considering “foreclosures,” per se. You’re probably going to look at “Real Estate Owned” listings, or REOs. These are properties that lenders have taken back after the foreclosure process is complete. You may also see these listings advertised as “bank owned.”
The other primary type of listing is called a “short sale.” This may qualify as a “distressed” property, but it is not yet in the hands of the bank or lender. The homeowner, lender and prospective buyer will negotiate to reach an agreement to sell the property for less than the owners owe on their mortgage.
The short sale is an attempt at compromise between the seller and lender, keeping the seller out of foreclosure and credit history ruin and keeping the lender out of the costly process of foreclosure and expensive business of property management.
There are many other characteristics that are consistent with REOs and short-sale transactions that may affect the escrow and eventual culmination. If you’re going to be considering homes to purchase that fall into these categories (or are considering selling as a short sale), your agent can help explain these characteristics and how they may affect the transaction.
Happy house hunting!
— Paul Suding, a real estate agent with Cool Santa Barbara Homes and Village Properties, is president of the Santa Barbara Association of Realtors. He can be contacted at .(JavaScript must be enabled to view this email address) or 805.455.8055.
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