Seattle

[sam99]

I assumed REO and bank owned is one thing? When property sell less than what is owed to bank, then it become short sale? So can short sale be without REO?

Do bank add to their cost lost interest payment during the time property is listed?

What does happend to other leins like 2nd mortgage, home line of equity or tax liens on the property?

I heard in some states home owner who lost home in a forclosure can still claim the house for the amount sold in given time period. Does that apply to foreclosure or REO or both and how does that work and when clock start to run to home owner to reclaim his/her home?

[GaryMC]

Sam,

Short sale is any time that you sell a house for less than what is owed on it.  It does not have to be in foreclosure.  You may have inherited a million dollars, and a mansion in Florida and you just want to leave, so selling your house for $50,000 less than what you owe on it is a short sale, you just pay the difference.

In today's economy, a short sale is still a sale that is less than the amount owed on the property, however your home is either in foreclosure, or about to be foreclosed on.  A short sale in this case may be were you are able to get 75% of the owed amount on the home, and the lender is willing to accept that loss.  You sell the house for that much, the lender gets paid off, your credit takes a major hit, and you go find a new place to live.

The second and third questions I do not have an answer for.

 Depending on state law, a foreclosed home may be purchased back by the defaultee up until a certain period in time.  I believe each state is different.  However, how many people who are in default and are foreclosed upon could be expected to suddenly come up with the money necessary to pay the entire mortgage, plus associated costs, if any, to get their home back?  That would again, have to be an inheritance, or a lottery win.

Regards,

Gary

[sna]

A REO refers to a property owned by the bank after the foreclosure process.  I believe this means the property wasn't sold at the foreclosure auction.   

A short sale is a case when someone is selling their property and the bank is willing to let go of the lien without getting full payment  (owe more than it's worth).  The bank agrees to this because they see foreclosure as the only option if they don't.   In a short sale, the bank is the one that ultimately agrees to the selling price.  From what I hear it can sometimes be a lengthy process because they're so busy.  

[sam99]

With REO, in most cases bank already owned the property and tenants/previous owner might have gone (I assume), so you deal directly with the bank via agent (most cases). Correct more or less?

With foreclosure, how do you make an offer? I heard on TV that it is run by county office as a auction or can it be bought before auction?

Reason I asked if previous owner can claim the house. Lets assume someone has very little mortgage and they lost house to bank becasue of financial situation. So bank has no incentive to  get him/her share of the house. I think bank just want their money plus cost back. Or bank might (in some cases) sell house at rediculously low price (miracles do happen). If somehow previous owner came across new money by selling or lottery or whatever they might come back to claim house for what you have paid for it?

What I heard it in that case you don't get any thing for any home imporvement you have done or buying cost you have paid for it. REO seems like good deal if done patiently but I just want to figure it out how much headache is this? I can deal with bank in case of REO since they already own it but I don't want to be bad guy if previous owner can still claim his/her house.

[sna]

I think buying at auction can be a real pain and you have to come prepared with cash in hand.  In some cases, you even have to evict the current tenants.    To buy before auction, you'd contact the owners and work out a deal (pay off their mortgage and a little extra cash to leave quickly without damages).   

[sam99]

thanks sna

[MattVWjosiep]

When a bank forecloses, the property goes to auction. The auctions are conducted at the courthouse, as-is, cash only. The bank will attend the auction and bid the amount of the mortgage. If nobody else bids, the property becomes REO/bank owned. What the bank does next depends on the bank and the property. Some put the property immediately on the market, sometimes work will be required and the bank may or may not do any work prior to listing the property.

The best way to make a purchase is to watch the property, try a short sale if you want, otherwise wait until the bank purchases the property at auction, then try to purchase it directly from the bank before they hire an agent and list the property. This allows you to finance the purchase and avoid real estate commissions. 

REO and short sales are much more complicated than a traditional transaction, and real estate agents do not necessarily have adequate education to handle the additional risks, so be very cafeful.

[sam99]

thanks Matt

[newbiee]

Hi, Matt:

How could you purchase a foreclosure directly from the bank before they hire an agent and list the property? when I call bank 800# for a foreclosure property, I was transfered to an agency who deal with REO properties and I was told that it cost bank a lot less to get an agency deal with all their reo properties. btw, the property I am interested is bank of America REO. Thank you.

Steve

[MattVWjosiep]

Hi Steve:

What was the agency?  Was it through the BOA 800# or a REO/Foreclosure company?

It might be hardier with large banks, but the local banks have a person responsible for the REO properties. I have talked to the person when I knew a property was going to be foreclosed and become REO. We negotiated for the property once it was REO and they saved the hassle and 6% commission.