Foreclosure, Bank Owned, Short Sale, REO, Auction...
What Does It All Mean?
The interest in Distressed Property has become more common because of the early 2000's mortgage crisis. Terms like; REO Bank Owned, Foreclosure, Short Sale, (Foreclosure) Auction, that once only real estate agents, bankers, and attorneys knew, are now every day conversation with average homeowners. However, there is still a lot of confusion or simple misuse of these words when discussing the various stages of distressed property. All of these terms refer to the involvement of a bank in the possession or sale of real estate property.
The most common definition; "Property that is under a foreclosure order or is advertised for sale by its mortgagee". Generally it is used to refer to a property that is or was financially "under water," meaning the homeowner owes more on the mortgage than the property is worth.
This is the most common term used to discuss distressed properties, but in reality is a "process" and not a "state of being". One definition is "The (judicial or non-judicial) legal process by which a mortgagor’s (owner's) right to a property is terminated, due to default and the property is seized". Foreclosure or Pre-Foreclosure has become synonymous with homes believed to be undervalued. Even on our web site and with most all realtor associations’ this term is used to characterized and find existing Bank Owned properties (not properties currently in the foreclosure process; see Short Sale). The Foreclosure process allows the lender to attempt to recover the debt by forcing the sale of the property of the defaulted loan. Once the borrower/owner defaults on loan payments and the lender files a lis pendens (Latin for “lawsuit pending”) to make a public default notice and begin the process.
REO - (Real Estate Owned)
Literally defined as "Real Estate Owned", but common understood to classify real estate property in the possession of a lender, but which is not directly related to its business. Property a bank now has, once owed by the mortgagor.
This is synonymous with REO-Real Estate Owned by a lender. The properties have already been through the entire (judicial or non-judicial) foreclosure process. These generally are a "good deal" or lower priced than comparable homes and are often, but not always in poorer condition. In some cases there can still be financing or priority restrictions to purchasing this real estate.
Defined as "The sale of real estate that generates proceeds that are less than the amount owed on the property". When a borrower and lender mutually decide and agree that selling a property at a loss is preferable to having the borrower default on the loan and go through foreclosure. Generally these sales take much longer to complete, 60-180 days or more, and many do not ultimately get bank approval. "Pre-Approved" Short Sales have a much better chance of success, as the lender has (pre)approved a Short Sale and also pre-approved the price. This leaves less room for negotiation, but save time and is likely a good value that will go through.
Again there are many uses of the word "Foreclosure", and one of them is when someone believes they are getting inside information about distressed properties most other people don't know about. You see them all the time; "Free Foreclosure List"...some businesses even charge money for these lists! Most likely what you are after is a government run public auction list. The state of South Carolina is a "judicial" foreclosure state. This simply means that all foreclosures must go through the court system and in front of a judge...this is not the case in about half of the U.S. states. These "judicial" foreclosures end with a final "public" sale of a property at the court, to the highest bidder. Be aware, auction property is still subject to ALL law suit judgments, senior lien priority, and existing tenants leases. A good title search and abstract goes a long way to avoiding a costly mistake.
Because our website represents “Real Estate for Sale", and Auction Property is not yet available for sale (until auction) we cannot publish these lists. Also these lists change almost daily. If you would like a current auction list for Charleston, Dorchester, or Berkley counties please Click Here and we will provide you with the information and some free advice. Periodically, we host free local "Buying Public Auction Property" sessions. If you would like to attend our next "Buying Auction Property" meeting please Contact Us regarding these events.
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