Significant Distinctions

Over the last week or so, I have been seeing many articles and receiving inquiries which blur the distinctions between types of sales and/or ownership interests. Here are certain distinctions which may eliminate some confusion.

An auction is a way to facilitate a sale and has no bearing on who owns the property. Any party who owns a property, or a lien holder (usually the holder of a mortgage, or a government entity) may cause a property to be auctioned. Most auctions garnering attention today are being caused by holders of liens through the foreclosure process.

A short sale is subject to third party approval and involves a process wherein a homeowner tries to negotiate with the lender(s) to take accept less than what is owed on the loan(s). Thus, any sale needs to be approved by one or more third parties (lenders and/or lien holders).

REO (Real Estate Owned), bank owned and lender owned are synonymous terms which mean that a bank and/or lender owns the property. This almost always results from a mortgage default and a foreclosure auction wherein the lender has bought back the property at auction, thus clearing title and eliminating any loans in second position (of lower priority). In some instances, a lender will take ownership in lieu of a foreclosure at the request of the property owner.

(It is my understanding that many people are using the term "foreclosures" as a catch-all and this is where some of the confusion lies. By way of example,  "I want to buy a foreclosure" or "My friend is making a ton of money in foreclosed homes.")

Both short sales and REO's are most often handled by real estate brokers such as myself and the process is similar to the purchase of any other home listed for sale with a broker.  Auctions may or may not involve real estate brokers and, depending on the circumstance, you could have the option of being represented by a broker without adding costs to the transaction.

All of the above ownership interests and/or sales procedures present opportunities and pitfalls for potential buyers too numerous and detailed to delve into here. However, if in the interim you have any questions, do not hesitate to contact me (john@jw-realestate.com or 978-423-9309).