In the current strong market for real estate, distress sales have dropped to a minimal level in the South Bay and most areas. Investors snap them up when prices are right. Nonetheless, now and then I'm asked what the principal types of distress sale terms mean. Here's a refresher:
First, a link to an article from my real
estate blog back in 2011 that gives an overview of the different types of
distress sales:
In a short sale, the owner offers the home for sale through a Realtor and
the bank, if they approve an offer, accepts less than they are owed, forgiving
the rest of the debt.
In pre-foreclosure, the bank has given the owner a Notice of Default,
saying in effect “pay up or we will sell your home in a foreclosure sale. Some owners list their homes after receiving
a Notice of Default, but they are typically in denial and won’t actually sell
their home, but if they do it’s typically for cash or a very fast loan. [expansion on this topic:
Foreclosure is when the Notice of Default has matured and the bank has
scheduled a foreclosure sale (the ones you hear about on the “courthouse steps”). At this point, you have an angry seller who
is still probably in denial but might sell for cash (there’s no time for buyer
to get a loan).
Foreclosed or Real Estate Owned (REO) properties have been foreclosed by
the lender and taken into their ownership.
The foreclosure is over, now the bank just owns the home.
And thank God most of these are over! -David
