A lot of clients have been asking me the difference between bank owned homes, REO, and Short Sales.  Thought I would share a quick definition of each and what the difference is in the buying process.

Bank Owned Homes (Foreclosures):  This are homes that are currently owned by the bank.  The previous owners failed to make their payments, so the bank took over the ownership.

The actual definition of Foreclosure is below: Foreclosure is the legal process by which a mortgage lender (mortgagee), or other lien holder, obtains a termination of a mortgage borrower (mortgagor)'s equitable right of redemption, either by court order or by operation of law (after following a specific statutory procedure)


REO: REO stands for Real Estate Owned, this is just another term for Bank Owned Homes


Short Sales:  A short sale is when a seller owes more on the home than what they are trying to sell the home for.  For example, a seller has a mortgage balance of 150,000, but they have the home on the market for 130,000.  So they are 20,000 short in payoff to the bank.


So what is the process in purchasing a Bank Owned Home vs Short Sale?


Bank owned Home/REO
Basically purchasing a bank owned home/REO is the same process in Kansas as it would be in purchasing directly from a home owner.  The 2 major differences is one, you are dealing with a bank vs an individual and two usually banks sale the home "as is" meaning during the inspection period of the contract, a buyer may have the property inspected, but it is only for their knowledge, the bank will not negotiate to a lower price or fix any items found during the inspection period.


Short Sale
Purchasing a short sale home does have some unique things about it.  First you must submit your offer to the current owners of the home.  Once they accept your offer, then the offer has to go to THE SELLERS LENDER to get approved (this process can take anywhere from 1 month to 6 months or longer).  Once the sellers lender approved the contract you can then close on the property.   You can get a really good deal with short sale properties, but do keep in mind that you want to be sure and negotiate that your inspection period will began AFTER the seller lender approves the short sale....you don't want to be out inspection cost if the lender does not approve the contract!  Also, keep in mind that it is a waiting game, so if you can't afford the time, then you might not want to purchase a short sale.


For more information on Overland Park, Mission, Shawnee Mission, Kansas City, Prairie Village, Johnson County, Brookside, Olathe, Leawood, Shawnee or Lenexa Real Estate, visit my website at www.yourheartlandrealtor.com