The real estate industry is full of different terms and phrases that may be confusing for those who are not in the market. First time home buyers or even those curious about the internal jargon of the housing market may be a bit confused to the different ways homes are sold. Here are some of the basic terms of how properties are sold.
This is the simple form of a property sale that many are familiar with. The seller has equity in the property. The advantage to this sale is how easy the process of the purchase is. There is a strong direct relationship between the seller, the buyer, and the agent. The one downside to the standard sale is at the end of the buyer. Most of the time, standard sales may be a more expensive option because sellers often take great pride in maintaining the value of the property in standard sales.
A short sale is when the owner of the home or property owes more on their mortgage than the market value of the property. They then ask the bank to accept a “short” payoff of the loan. This type of sale can be in pre-foreclosure but, the homeowner is requesting their ban to let them sell the property for less than what is owed on their loan.
These types of sales still go through a real estate agent yet the nature of the sale does not work like a regular sale. The downside to short sales is that it may take a few months for the home to close. Another downside to short sales is that the seller can accept an offer on their home but, that does not assure the buyer that the property is guaranteed theirs. It is ultimately up to the lender to decide.
When a home is in a pre-foreclosure, the owner of the home is over 90 days late on their mortgage payment, and their bank has initiated the foreclosure process. It is still legally owned by the seller but, it could be a short sale. Pre-foreclosure also does not guarantee that the home will be foreclosed.
The definition of foreclosure is a legal process that allows the lender to take back the property in collateral for the loan. Purchasing a foreclosure is a bit different than a normal standard sale. They are purchased in at an auction without touring the actual property. The buyer is purchasing the home as is. Most foreclosures come with serious repairs and investments, so there is some risk when buying a foreclosed home.
Bank Owned or REO
This type of sale is when the home has already been foreclosed and is fully owned by the lender. The transaction is handled between the lender (Bank or Real Estate Agency) and the buyer. The advantage of these sales is that the price of the home is a bit lower than the market price.