What is a “Short Sale?”
This occurs when the homeowner decides to sell and the value of their home is worth less than what is owed. In other words, not only does the selling homeowner have to sign-off on the offer on their property but the lender (or lenders) as well. Many homeowner’s involved in short sale situations have a 1st Trust Deed (mortgage) but a 2nd Trust Deed as well. The homeowner of a short sale is still the owner of the property as is still responsible for real estate taxes and back payments plus interest, etc on the home.

What is a “foreclosure?”
This transpires when the homeowner reaches a point where he/she has not paid the lender and is normally 3 payments behind. The lender at this point has filed a “Notice of Default.” The minimum time between the notice of default and the trustee sale is 3 months plus 3 weeks. The trustee must wait 3 months after the recording of the before she can advertise the trustee sale. The trustee sale must then be advertised at least once a week for 3 weeks. However, the homeowner has up to 5 days before the trustee sale – to bring their account current and reclaim their property.

What is an “REO?”
This is an acronym for “Real Estate Owned” – by the lender, that is. The lender or bank at this point is listed as the actual owner of the property according to the tax records. The seller/lender is looking for a quick sale and fast escrow. Sometimes, this may be the best route to go, if they are priced competitively.

Short Sale or REO/bank owned home – which is better to buy?
What’s best for you depends on your situation and timetable. If you are not pressed for time, placing an offer on a short sale (pre-foreclosure property) may be a good choice. Keep in mind, however, that even with efforts by the lenders to speed up the long arduous process, results have been rather slow. It can take 1-2 months just to receive an answer on your offer from the seller’s lender once the actual owner has agreed to your offer. Moreover, only about 40% of sort sales ever close escrow in the San Diego market. Some good things about buying a short sale is that since the property is still in the owner’s name you’ll have the ability to ask the owner questions (through me) regarding the home during the contingency period.  In addition, I will be able to ask on your behalf, standard and extra property disclosures that could reveal past problems with the property.

Buying a REO/bank owned home can be a rather quick process. Since the properties have already been repossessed by the bank, the bank now has the property on the books. Therefore, the bank is paying real estate taxes, utilities, and maintenance. Plus there is a tremendous pressure on the bank to dispose of the home quickly.  Once you make an offer to the bank, the average response is usually between 1-5 business days. Once the price and terms are agreed to, then a 30 day close of escrow is the norm.  A caveat include not receiving very little in terms of property disclosures since the bank never of occupied the home.. Also, the given time allowed to the buyer to perform all inspections on a REO/bank owned home is usually limited to 7-10 days. In addition, the homes usually are in dire need of deferred maintenance -usually more so than a short sale property.