There are so many terms for distressed properties these days that it can be confusing. "Bank-owned," "short sale," "foreclosure" and "REO" (real estate--owned) properties all refer to the involvement of a bank in the sale of a property.
Bank Owned Properties

1.                A bank-owned property has gone through a foreclosure process and an unsuccessful auction sale. After an unsuccessful sale, the bank retains ownership. This type of property is also call an REO property.
2.                In contrast to a short sale, a bank-owned property is no longer the property of the owner. While a foreclosed property still must go through an auction, a bank-owned property has gone to auction, and after an unsuccessful sale, the home has been repossessed by the bank and put up for sale.

3.                For a real estate investor, purchasing a bank-owned property carries the benefit of a low purchase price, typically lower than a foreclosure property. By the time a property moves from foreclosure to bank-owned status, many of the liens and other expenses have been lifted.
With a reduced price also comes the advantage of acquiring a home with equity. If the property is located in a stable area, it's likely that the neighboring property values will be higher.
4.                Many bank-owned properties are in disrepair thanks to extended periods of vacancy. If you're not willing or financially prepared to make repairs or clear any violations, a bank-owned property probably isn't the best way for you to go. And if the property is not in move-in condition, finding financing can be difficult.
In addition, disclosure statements, including information about lead-based paint, radon, mold or any other problem areas, are not provided.

Short Sale
In real estate, a short sale occurs when a bank agrees to take less money for a property than the amount owed on the mortgage. This usually occurs when market conditions cause home values to decline. Banks generally do not want to own real estate, and would rather settle for less money from an able buyer who will take the property out of the bank's portfolio.
Upside-Down Homeowners
1.                A short sale may be advisable when a homeowner is "upside-down" on his mortgage. A homeowner who needs to sell his home for $250,000, but who owes his mortgage lender $275,000, is upside-down.

2.                Homeowner’s who express financial hardship, such as a job loss, divorce or similar hardship, may qualify for a short sale.

Foreclosure Alternative
3.                A lender may agree to execute a short sale while the homeowner is still making mortgage payments to avoid foreclosing on the home.

Time Frame
4.                Your lender may take between 45 and 90 days to approve the terms of a short sale.

5.                A short sale may lower your credit score by as many as 100 points. However, a foreclosure may lower it by as many as 250 points.

REO Properties
REO properties, also known as Real Estate Owned properties, are a type of property owned by a lender after a repossession and auction process. Properties only become REO properties after their ownership transfers from the original owner to the lending agent, usually due to failure or inability to make mortgage payments. Here are some additional facts about REO properties

What Makes a Property an REO Property?
1.                A property is considered REO if it has been repossessed by the lending authority, and if that lending authority has been unable to transfer ownership of the property to a different, paying owner.

How Does a Property Become REO?
2.                A property becomes REO if a lending agent repossesses it, tries to auction it for the amount due on the loan and fails to find a suitable buyer. At that point, the property becomes an REO property under the ownership of the lender.

Who Owns REO Properties?
3.                REO properties are almost always owned by bank and other lending institutions, after repossession from a defaulted mortgage.

What Are the Benefits of Having REO Properties?
4.                To the lending authority owning the property, there is little benefit to owning an REO property, as it represents an investment gone bad. By definition, an REO property is real estate that cannot be sold at auction for the minimal price of what was owed in the loan, so every REO property owned is property that came at a loss to the lender.

Are REO Properties Available for Purchase?

REO properties are always available for purchase, and are often excellent deals. REO properties can be found by checking with Edward Beisler @ Keller Williams Realty.

HUD Home
"HUD homes" is a term often heard in connection with government-foreclosed homes. Actually, this is a misnomer, as all these homes started out as homes that had loans backed by the Federal Housing Administration (FHA)
1.                HUD, the Department of Housing and Urban Development, is a department of the government responsible for a number of federal housing agencies and programs. One of these is the FHA.

2.                When an FHA-insured loan goes into default, the home then falls under the jurisdiction of HUD, which has the responsibility of disposing of it.

3.                The originating lender is paid off by FHA, and the home goes back to the government as its owner, rather than going through normal foreclosure procedures. It is then administered by HUD for sale.

Process of Sale
4.                Just as financial institutions do, HUD has real estate professionals represent its interest in selling these homes. Sometimes it may be possible to assume the existing FHA loan, and at other times a new loan must be taken out by the buyers of a HUD property.


Either way, HUD properties are not hard to find. They may be listed by individual real estate companies or by multi-listing services, or you can contact your real estate agent or call your local HUD office.