Is it a Short Sale or REO? What's the Difference?


What is the Difference Between a Short Sale and REO?

When the borrower can no longer pay their mortgage loan, their home can wind up back on the market as either a short sale or Real Estate Owned (REO) property for what’s known as a distressed sale. The circumstances leading up to both of these can be similar, but the transactions are quite different.

Real Estate Owned (REO) Properties

When the borrower can no longer pay and defaults on their loan, the lender (often a bank,) takes the home back and puts it on the market for sale. Many times the lender will sell for a lower price than the original loan balance. The seller is out of the picture.

Short Sale Properties

A short sale happens when the seller is in trouble and asks the lender to accept current market value on the home, which often times is less than the amount they owe. The seller is in foreclosure, but the property has not yet been taken back by the lender. The seller puts the home on the market to sell it “short,” and get out of the loan.

In either case, it is advisable to work with a real estate professional who knows the REO and short sale process. Use our Meet an Agent tool to find an agent who can help with buying or selling an REO or short sale property.

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