Short Sale - A short sale of real estate occurs when the borrower is unable pay their mortgage due to financial hardship and attempts to sell their property for a price which will not satisfy the outstanding mortgage balance owed the lender. In this transaction, a lender determines taking less than the mortgage balance owed is more prudent than proceeding with a protracted foreclosure process, which can be more costly for the lender and may do more damage to the borrower's credit rating than the short sale. Due to the growing number of short sales in today's economic climate, lenders have departments handling these transactions. The lender will request a BPO (Broker Price Opinion) or Appraisal to determine if the short sale price is in the lender's best interest. A short sale can be a very long process, as any subordinate lien holders to the first mortgage may need to approve the short sale. While some lenders may forgive the deficiency by prior agreement, some lien holders may not. Agreement by both borrower and lender are required for the short sale process to proceed, if at any time in the process either party changes their mind, the potential buyer can be left having invested time and money and not be able to purchase the property.
Foreclosure - Foreclosure is the legal process in which a lender obtains a court order to terminate an owners rights to a property when the owner defaults on the lien on the property. Upon completion of the foreclosure process the lender repossesses the property in order to sell it to recoup the mortgage balance and any legal costs associated with the foreclosure. The lender may pursue a deficiency judgement from the borrower if a promissory note with recourse was made.
REO Properties (Real Estate Owned) - REO properties are properties which have gone through the foreclosure process, have not successfully sold at auction and are now owned by the lender. REO properties are sold by the lender or through local real estate brokers experienced in REO properties.
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