What is an REO? And is it better than a Short Sale?

I know I probably am repeating myself here, but a lot of my clients seem to want to know answers to these questions. Just yesterday, I met a wonderful couple looking for a home in Elk Grove and it seemed like every house we went to look at was either a short sale or an REO. I believe there's one home on our list which is owned by a private seller.

If you're looking specifically for bank-owned homes, look in Elk Grove.

Anyway, back to the question - REO stands for Real Estate Owned. By a lender. It is usually a home that has been foreclosed upon by the lender for nonpayment of the mortgage. It may have a sign that says "bank repo" - a term that annoys me, by the way. Cars get repossessed. Homes get forclosed. Just a pet peeve.

A short sale on the other hand is where the people selling the home have decided to get rid of it before it goes into foreclosure. They owe more than the market value, which means the difference between what a buyer will pay and what the seller owes will have to be forgiven by the seller's lender. This usually involves a lengthy process and there are quite a few short sales that never go through.

Biggest piece of advice I can give you: If you're looking for a short sale, be prepared to wait. If you're buying an REO, get all your inspections done by your own hired professionals.