"SOL" Homes defined: MLS Foreclosures, REO, Short Sales, Pre-Foreclosures Defined & Email Alerts

Real Estate Broker/Owner with Northern Virginia Homes - FRANKLY REAL ESTATE Inc
  • Newspapers are filled with talk of the flood of foreclosures, but none that I have seen have taken a step back and defined all the different industry words for my new industry word: "SOL" (S* Out of Luck) Homes (tm), and how to buy them. 2-3% of MLS listed homes are SOL in Northern Virginia. Can your agent find them?

It might seem odd that I'm writing about how to buy foreclosures listed on the MLS since some might have just finished reading my article Attn. Market Timers! The EXACT Best Day to Buy!

Well SOL homes can get you a 5-15% discount* if you

  1. Know how to search for them, AND
  2. You have patience
  3. You aren't picky!
  4. Fully understand the risks of buying "as is"

* Side shout: BusinessWeek did a great job in their article This Old Foreclosure Buying directly from a bank avoids some risks, but don't expect a steal They both dispelled the 30-50% pennies on the dollar mentality people equate with foreclosures and how foreclosures of a year ago are different today, they no longer occur mainly on courthouse steps. They use the MLS)

So, let's go over the SOL terms:

  • Pre-Foreclosure: term used by agents or sellers that are in the process of being taken to the courthouse steps since they have defaulted on their mortgage (didn't pay it). They want to sell the property before it gets foreclosed on, and oftentimes before it is taken over by the bank.


  • Foreclosure: Technically a foreclosure is a house that is being auctioned off at the courthouse steps. Many people use this word incorrectly to represent a house that is in Pre-foreclosure, or has already been foreclosed on and taken over by the bank (see REO)

    Foreclosures aren't occurring on the courthouse steps as much (see BusinessWeek Art) since the amount owed (the starting price for the auction) is TOO HIGH. So when the minimum price is too high on the courthouse steps, the banks take them over and sell them on the MLS through Realtors. (learn how to find these later in the article)

  • Short-Sale: Usually an MLS listed house that is on its way to being foreclosed on. The bank has agreed to allow the seller to sell the home for BELOW the loan amount. For example a $500k home was bought with 100% financing. The market price is now $475k. The seller can a) bring $25k to closing or b) do a short-sale. With a short-sale, the bank eats the $25k (but the seller still gets a taxable 1099 for the difference. This process is seen as being better for the seller's credit vs bankruptcy and foreclosure.)
  • REO- Stands for "Real Estate Owned", but it really means Bank Owned. I guess buying a B.O. house wasn't too appealing. These are homes that were already "foreclosed" on. Nobody bought them on the courthouse steps and the bank took it over and is attempting to sell them, usually (but not always) for a discounted price.
  • Bank Owned (same as REO)
  • Third Party Approval- If you see this in a listing, it is probably a Short-Sale and it is warning the agent that some extra paperwork and time will be required.
  • Auctions, "Buyer's Premium": Some auctions require a 2-10% "premium" be paid on top of the winning bid. So if you bid $500k, you have to pay $550,000. In my opinion, it is a marketing trick that auction houses use to trick sellers by saying "you pay nothing, the buyer pays our commission." Just make sure you do the math, your NET is what matters.
  • Auctions, "Reserve price." Sometimes this is also marketing trick. I have seen $700k listed houses have a $690k reserve. They get people to the auction, all excited to get a deal. The auction ends and they say "sorry you didn't meet the "reserve price," here, how about a counter? Sounds like a trick to find out who might be remotely interested in the property.
  • Auctions, "No Reserve." If you are an Ebayer, you know what this means. The product will be sold, no matter HOW low it goes. If you see "No reserve" it MIGHT be what I call a REAL AUCTION (send it to me, I'd love to see it).

Auction disclaimer: I am not an expert when it comes to Auctions. I still have yet to see ONE "real auction" in Northern Virginia. I think they don't exist, but I can be proved wrong if you'd like (have at me in the comments section).

Dealing with the above types of property are a PAIN.

Expect counters to sometimes take several days. And an SOL home is NOT necessarily a better deal. Somebody might have paid $500k for it with 100% financing and the list price might be $480k as they feel the waters. I saw one short sale in my building that started at $600k (they paid $590k). It was overpriced. so it sat. Then the seller/bank got serious. They did a drastic drop to $530k. It sold for full price (while I had 4 people come to me wanting to offer $480k, and they missed out). This was 1 of 2 best priced units in the building over the last 2 years. Another short-sale came on and was sold in 4 days, so be ready to act FAST.

So how many of these are there EXACTLY on the MLS?!

Homes that are SOL can be found by having your agent search the Realtor Remarks for keywords:

REO, foreclosure, bank, pre-foreclosure, forclosure*, short sale, auction, third party, 3rd party. (*9% of the time this word is misspelled!)

In Arlington:

Update to article: I thought I'd run some data from Woodbridge. To my amazement 35% were SOL! This blows my mind!

In Woodbridge

  • Today there are 273 MLS homes from $300k-$325k. 97 (35%) are SOL!

MORE DATA ON 6 NOVA AREAS:  48% of MLS homes are SOL (Foreclosure etc) in Herndon ($300k-400k)

This is shocking!

If you do plan to buy, you need a good agent to know when to spot a "better deal" (remember I don't believe in "good deals" until you sell your place. See "Buyer's Market?" No Such Thing As a "Good Deal")

NEW SOLUTION: EMail alerts for SOL homes & PATIENCE.

So have your agent sign you up for alerts based on your price range AND these SOL keywords in the Realtor Remarks (different than the MLS Public Remarks). If your agent can't do it, have them email me, I'll show them how. If you don't have an agent... (sorry I tried to hold off as long as possible) welcome to FranklyRealty.com . I'll set it up for you.

Love getting your comments, so please let me know if I missed any search terms. I just added "foreclosed" with the "ED" ending. Also tell me if you think my definitions are inaccurate.

-Written by Frank Borges LL0SA Virginia Broker FranklyRealty.com

Ps. Please send typos and corrections.

pss. The volume of foreclosures and SOL homes is MUCH higher further out from DC in areas such as Woodbridge and Manassas and Fairfax.

psss. Virginia Realtors, make sure to join the new Virginia Foreclosure Group.

Comments (25)

Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News
Frank, I also have saved searches by certain brokers and agents who specialize in "SOL" properties.  Still haven't found the "great" deal but it is going to be up to the banks to figure out a bottom line.  Nice information!
Sep 11, 2007 01:06 AM
Rebecca Savitski
BSR Real Estate Group - Cary, NC
NC Real Estate Listings
This is one of my daily searches. Great post
Sep 11, 2007 01:08 AM
Stella Barbour
NoVa Brokers LLC - Vienna, VA
Principal Broker, Serving Virginia and Maryland
Great post.  Just to add to this, I am also a residential agent but I also work at a law firm (which we do a lot of bankruptcy work, especially now).  When I am putting someone in a rental, if the rental sounds too good to be true, like a $800K house for $2000 per month, then research should be done on when the home was purchased, (If 2005-2006 then check to see if for sale also and whether or not 3rd party is in the remarks)  because there are people accepting the security deposit and first months rent and after renter moves in, home is being foreclosed.  The homeonwer now has $4000 to help them get by another month while they are losing their home.  I am in Loudoun County, Virginia and I am seeing this happen more and more.  I have people asking me what to do legally if they are the new tenant and there really is nothing because who ever is losing their home will be filing bankruptcy most likely the tenant has no recourse.
Sep 11, 2007 01:25 AM
Paul Moye
Benchmark Realty - Franklin, TN
Broker, GRI, SRES
Great info, are you in any of the REO groups in AR
Sep 11, 2007 01:31 AM
Lori Gilmore
Baird & Warner Real Estate - Joliet, IL
Realtor - Will County Illinois
Great post Frank -- Many Realtors who work REO's in my area don't always spell it out or use the agent remarks field so I also search the public remarks field for the following terms. . .corporate, proof of funds, no survey, no termite, addendums. . . I'm able to find alot of properties that we might not have found by sticking to the obvious terms! 
Sep 11, 2007 01:56 AM
Stella Barbour
NoVa Brokers LLC - Vienna, VA
Principal Broker, Serving Virginia and Maryland
No.  I am just in a few groups.  With working two full time jobs, not a lot of time for new knowledge. I have been trying to make more time to share my knowledge and experience and gain new knowledge.  With my legal background and bankruptcy experience for 10 years, I am able to assist people in their worst moments . . . Losing the american dream . . .and then getting them back to where they need to be and getting their dream back over time.
Sep 11, 2007 01:59 AM
Dean Crandall

Great post Frank! I've performed searches for clients over the past five plus years I've been in RE and I search a few additional terms. Consider searching for these ones as well: (our MLS allows for wild card searches so foreclosure is searched as "*fore" (no quotes)) bank, 10.2 (warranty of condition), forclosure (for misspellings), foreclosure, short sale, REO, as is, as-is, TLC, third, 3rd, party, and letter.

Each of these terms imply that there are financial issues going on or which have gone on... Sometimes, I'll get a "party" house included, but those homes are usually overpriced and aren't considered by buyers.

My list of "distressed" properties is sent out to lookers and clients who are looking for deals. Often times buyers looking for a "good deal" end up buying a non-distressed (non-SOL) home when they're looking for themselves.

I'm new to 'rain and I'll keep checking back!

Dean Crandall
KW Westfield
Highland, UT

Sep 11, 2007 02:27 AM
Roy Kotz
NPDodge - Papillion, NE
I have a couple invetsers that I consistantly search for the SOL home. Even though there are more of them on the market, at least in the Omaha area, it seems that most owners still are not realistic with the pricing, and when one is you may have a day to contact your buyer and get a contract in before it is sold.
Sep 11, 2007 02:44 AM
Lisa David
Re/Max Gateway - Reston, VA

I also have a few investors that are constantly looking for SOL's that aren't realistic about the price. They always want to offer an amount significantly under the asking price.  I end up doing tons of work and then the listing goes under contract with another realtor.


Sep 11, 2007 02:49 AM
Tracy Thrower Conyers
Silicon Beach Properties • KW - Venice, CA
buy. sell. lease. residential in silicon beach.

Excellent post, Frank!  You really described this timely topic in excellent layman terms. 

A note for Missy and other agents -- double check to make sure that your MLS hasn't added a searchable field for these properties.  I was speaking to a client yesterday who belongs to one of the larger MLS's here in SoCal and he pointed out that there is a field called "legal" that I don't think was there until recently (I'm not an active agent, but I remember talking to other clients in that area before on that topic).  MLS fields are not set in stone.  It's just data and things can be changed.  Ask for it.  Times change and it's your data.  Make your MLS help you do your job.

Sep 11, 2007 02:53 AM
Katie Evans
Keller Williams - Greenville, NC
BO might be a good term....with all the sweat equity that has to go into it!
Sep 11, 2007 04:05 AM
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

Hey Dean, Thanks for the other search words.

I do already include forclosure which is spelled wrong 9% of the time. I tried "fore*" and I got 3 times more results. Turns out it pulled up words like "before." I will use foreclos* to capture the "ED" vs "ure" and "ures" I could add as-is, but I found too many false positives "washer and dryer is as-is". But I do like adding "addendum", but I think "bank" usually covers it since I see "bank addendum" frequently used as a phrase. 

Sep 11, 2007 05:23 AM
Joshua Talayka
Chase Internatinonal - Reno, NV
great post  thanks for all the info
Sep 11, 2007 07:31 AM
Amy Bergquist
RE/MAX Premier, REALTORS - West Hartford, CT

Frank- terrific, informative post!  I am having lunch next week that is an attorney that handles foreclosures so I can get the inside scoop.  Your post gave me a good background so now I can come up with pointed questions.  Thanks!

Sep 11, 2007 07:48 AM
FRANK LL0SA Esq.- Northern Virginia Broker .:. FranklyRealty.com
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA

To all,

I just got a call from somebody that is facing foreclosure. Their house is already listed on the MLS. What should they do? I know that there are systems and processes to mitigate the damage. What services have you heard of to help people stop foreclosures? And I'm not talking about the "we buy your home" places that want $100k off.

Should they file bankruptcy? Foreclose? Get the bank to agree to a short sale? If so, are there services that help them do all this?



Sep 11, 2007 09:41 AM
Dan Forbes
Bradenton, FL
Thanks Frank for the good post. This market is bringing wacky buyers out of the woodwork who think they can buy homes for 50 cents on the dollar.  Most of them are watching way too much late night TV.
Sep 11, 2007 10:56 AM
Tracy Santrock
Fonville Morisey/Santrock Realty Group, Inc. - Cary, NC
Raleigh - Cary Realtor/Broker In Charge
Investment properties are tought.  Frank, you really have a great feel for the different segments - REO, short sale, foreclosure, auction, etc.
Sep 11, 2007 12:36 PM
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes
Interesting post. Thanks for sharing the information.
Sep 11, 2007 02:15 PM
Stella Barbour
NoVa Brokers LLC - Vienna, VA
Principal Broker, Serving Virginia and Maryland


On the call you got re foreclosure.  Is their home already advertised for foreclosure, or did they just receive a notice of "intent" to foreclose. That will make the difference in how much time you have to work with them and that will determine which way to go. 

Do they have 1 or 2 mortgages?  If they have 2 are they with the same company?

Is this a married couple?

Is their equity? 

Sometimes you can file bankruptcy Chatper 13 to protect the home, buy some time and sell through the bankruptcy system, if equity is involved.  If no equity, and they have other debts then Chapter 7 and start over.  If you have any questions, please contact me. There are so many options, I would have to know more about their situation.


Sep 12, 2007 12:39 AM
Matt Ratcliffe
Great article.  I found it very educational.  I needed to know all of it.  Matt Ratcliffe
Sep 12, 2007 07:54 AM