Hi Fernando.  It is still a surprise to me how the general public thinks every house in a foreclosure...they have no clue on what the differences are.

Hey Fernando, thanks for the tip.  This is a good way to explain the difference to clients.  Because most clients don't understand the process of foreclosures and some assume that foreclosures are bad.

Very succinct explanation of the difference between two terms that have become basically interchangeable, even among agents.

I think it's important to make the distinction that Foreclosure is the process of taking possession of a property as a result of someone's failure to keep up mortgage payments, HOA Fees, or in some situations taxes. It is not a short sale and in the case of an HOA (condo association for instance)  the HOA using the process of Foreclosure to collect back HOA fees.

REO is simply bank owned property. Would include 1) property take through the process of a formal court sanctioned Foreclosure sale where the bank "bought back" the property and 2) property title received from the owner by way of the deed being signed over to the seller, commonly called Deed in Lieu of Foreclosure. DIL's are becoming more popular as it avoids the costs of foreclosure to the bank, makes for cleaner transfer of title (remember robo signing) and for the seller avoids having a foreclosure on their credit.  Many DIL's are negotiated settlements for less than owned with no future collections by the lender. Another advantage to the seller who is facing foreclosure.

Fernando, 

Great point.  In Georgia, you have to bid on the courthouse steps and then have 100% of the bid amount in cash or cashiers check to hand over at that time, sight unseen.  A much larger majority buy them as REO's.  

All the best, Michelle

I especially liked the pros of cons of the REO vs the foreclosure market, I think those distinctions would be very valuable for a buyer to understand.

With tight supply working with an agent that knows the REO market is going to be an absolute must for a buyer in your area.

Fernando, I don't think most folks ever think about the difference you point out.  Good points, and something to think about before you buy.

Fernando - The ability to inspect a property is an important one especially for someone who doesn't want to take on a big risk.

Fernando, I am just glad we pretty much missed this whole mess in Texas and it's a good thing people in your area have competent agents like you to help stay informed. Honestly, it's piled up so high these days...it takes wings to stay above it all!

Congrats on the feature! Great job explaining the differences between a REO property and a foreclosure auction. Thanks for sharing and have a great week.

These questions come up all the time.  This is a nice post and it makes the differences easy to understand.

And the 3rd confusion into the mix is SHORT SALES. . . they are not a foreclosure or a bank owned home (REO) and work differently too. 

Great job explaining the difference between a REO and a Foreclosure. This will definitely clarify the two terms.

Fernando:

This post may help people understand the difference between REOs and foreclosure properties.  Most people do not understand short sales, foreclosures and REOs.