Definition of Foreclosure REO Short Sales

Foreclosures, REO and short sales are all terms for homes that are no longer in the possession of their owner because of inability to make mortgage payments. Though they all describe the same thing, these terms have different definitions.

Foreeclosures

A foreclosure is a home that has been taken back by the bank and will be placed up for auction. The borrower has defaulted on the payments and has been legally removed from the home.

features

REO and short sales are both prefaced by foreclosure.

REO

REO stands for Real Estate Owned. This means the bank owns the home and has placed it on the market for sale.

Short Sale

After defaulting on payments, the borrower works with the lender to get the house sold before it is auctioned. The lender will accept a reduced price for the home, less than the balance of the mortgage.

Consequences

All three processes result in the borrower losing the home and being responsible for the balance of the loan after the sale or auction. The foreclosure is a blemish on the homeowner's credit record.

References

• Investopedia: Short Sales And Foreclosures: When It's Time To Move On