Since there is an ongoing economic depression, more and more people are losing their homes.
One of the major blows of this current condition is mortgage payment delinquencies.
Homeowners, who became unemployed or undergoing all kinds of hardships, are currently experiencing this crisis.
As a result, their properties undergo foreclosure and eventually, a Real Estate Owned Sale.
But what is the difference between the two? Which one should you chose to purchase? Many people may not fully understand the difference between a foreclosure property and a Real estate sale.
To understand the terms effectively, read the following sections.
Nature of the property Properties sold through foreclosure are those owned by delinquent homeowners.
The lien holders of the property have requested the court's assistance to repossess the house to terminate the borrower's equitable right of redemption.
On the other hand, a REO is a property that has been repossessed by the bank or the lenders after an unsuccessful auction.
These properties may be free of lien upon successful negotiations by the bank with the other lien holders (such as the HOA and IRS).
Manner of Selling Foreclosure sells properties through an auction.
Court officer or county sheriff may facilitate the bidding.
The bidding price may be set initially that which is equivalent to the borrower's outstanding loan but not more than the current market value of the property.
In this case, the initial price should be levered with the lowest possible value.
Real Estate owned properties are sold directly by the bank.
They are quite expensive compared to foreclosure properties since lenders would take every opportunity for them to re-gain their losses.
This means pricing may be based on the outstanding loan plus other foreclosure costs.
Eviction of Occupants In foreclosure process, the county sheriff performs the eviction process.
In REO sale, the bank initiates it and may involve an eviction coordinator.
Various states have different laws as to eviction.
Therefore, the period may also vary.
It can be as early as 8 days or may be as long as 60 days from date of notice.
Additional Information Buyers of foreclosed properties may have tons of competition.
The deed of the house is granted to the highest bidder.
As you can see, even if the property cost is low, you still have to top the offer of the highest bidder to win.
This means you have to be prepared to go all the way, if you really want the property that much.
Another thing, foreclosure does not give their bidders the opportunity to make counter-offers in the event that the property is defective.
They cannot even obligate the court to make repairs before putting it on sale.
On the other hand, sale of REO properties have more advantage.
Homebuyers can negotiate the prices.
Sometimes, lenders would end-up fixing the place up to increase its value.
Another good thing about this sale is that homeowners will be assured that the property is already free of all liens.
Moreover, buyers can freely move-in the property after the closing time because the house will be vacant.
Deciding What to Purchase Deciding what to purchase may depend on what is important for you.
You really have to weigh the advantages and disadvantages of buying both properties.
However, there is one thing buyers can be assured of: the acquisition cost of the property can be fairly low for both types of sale (although foreclosure sale have considerable low prices than REO sale).
But as to the smoothness of the home buying process, REO may have the edge.