Breakdown of the 3 Types of Foreclosures - What do REO, HUD, and VA mean??

Foreclosures Foreclosures!

They're all over the news and they are all the latest rage for those out home-shopping.  Realtors, newscasters, and others toss out those terms REO, HUD, and more like they're just another piece of the alphabet.  But what do they really mean??

There's basically 3 types of foreclosures - REO, HUD, and VA.  Then you have Short Sales - which is a pre-foreclosure type.  

1. HUD - Housing and Urban Development owned - these homes were originally bought by someone with FHA financing, who then defaulted on the loan.  They are basically government owned at this point.  HUD homes generally come on the market with an initial bid period ending on a Sunday.  Offers are put in by real estate brokers online and the winners notified so that paperwork can be completed.  HUD's offer a couple of nice advantages in that they provide an up-front inspection that should identify some issues (of course, your own more thorough inspection is highly recommended) and they note whether a home is FHA insurable or an escrow amount for FHA insurability.  
2. VA - Veteran's Administration owned - these homes were originally bought with a VA loan (military) and were then defaulted on.  Generally you see fewer of these, at least in our area. 
3. REO - Real Estate Owned by the bank - these homes were bought the usual way through any number of methods, banks, lenders, trusts, etc.  The buyers of these homes defaulted on their loan and the lending bank took the home back and is now trying to sell it.  REO's can have a myriad of different owners, procedures, requirements, or more, based on the wants/needs of the owner bank. 

Those are the three types of foreclosures for sale.  This takes a various timeframe depending on the lender who repossessed the bank, area it's in, etc.  Sometimes these homes sit empty for months at a time while all the paperwork is filed and gets to the right place before it finally goes on the market.  

And then there's the popular catch-phrase of today's real estate world - short sale!

• A Short Sale is not yet foreclosed.  These are sales being made in which the market value of the home is now less than what is owed on the home, leaving the owner in a negative equity situation.  The mortgage company for the owner has to approve a loss on the home, or a short of what is owed them.  Most times it is also a case where the seller has stopped paying and is iminent danger of foreclosure, but not all cases are this way.  Compared to bank-owned, they are generally in better shape and still lived in (at least here they are!).  Many can just be moved right into with only a little work.  The worst part of a short sale is that there's no guarantee the bank will allow the loss to happen and they generally take a long time to decide, sometimes as long as 6-8 months.  Some are faster than others. 

There you go!  A brief rundown on what all the lovely foreclosed acronyms mean.  I'd be happy to take you out looking - bring your flashlight!

Click Here to Search Foreclosures in Sedgwick County!

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Sheree Wilkerson

sheree@rwwichita.com

Visit www.KansasHomeBuzz.com to search more homes instantly!

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