Melbourne Florida Homes for Sale

As much as these have been the topic of conversation for the last couple years, some home buyers are still not sure what the terminology means and what determines if it falls into these categories. Well, here is a summary of these property types.

Short Sales – Although some would love to believe that a short sale is a short process – it is typically far from that. A house that is being “sold short” or as a “short sale” is a home that is being sold for less than the mortgage the bank holds on the property. Here is an example: Joe and Mary bought a house in 2006 for $250,000 and took out a loan for that amount. Joe and Mary decide for whatever reason in 2010 that they need to sell their house. Since values have shifted downward and similar houses are selling for $150,000, that is the price that Joe and Mary try and sell the house for. In this example, when they sell their home, the couple has to come up with the remaining cash at closing to pay off the mortgage note on the house or they have to get their lender to agree to sell the house for $150,000 and figure out what to do with the $100,000 in deficiency.

This is the part that is problematic for sellers and what takes so long. The bank is a third party that is not subject to the purchase agreement but has to approve the purchase. The bank will do its due diligence to determine what the value of the property should be and if Joe and Mary have a significant enough hardship that the only alternative would be the bank foreclosing on the house if a short sale is not approved. The bank orders a BPO, or broker price opinion, to determine the value of the home and they hire or assign a negotiator to work through the deal. It can take a bank anywhere from 30-180 days to determine value and if they will accept a short sale offer on the table. If you think you should sell your home in this fashion, you should consult a Realtor that is SFR certified which means they have had training in short sale and foreclosure sale procedures and know the process. Sellers will also want to consult a lawyer for legal ramifications and a tax attorney to understand any tax implications that could result from the sale of the home.

Foreclosures - Ok, so if the bank owns the property then the house is being sold as a foreclosure, right? Not exactly. A foreclosed home is one that has completed the legal process of foreclosure based on state laws and is going to be offered in a court property sale to satisfy the mortgage holders deficency. A foreclosed property must be researched by buyers because there could be back taxes, liens or other encumberances on the property that the buyer is not aware of. When the home is purchased this way, the buyer is issued a certificate of title from the court and the rest is history.

But I keep hearing that everyone is buying a foreclosed home these days, so what are those?? That leads to . . .

REO Bank Owned Properties – REO stands for Real Estate Owned Property (which I know doesnt make sense but that is what it means). This is where the court tried to sell the house for the deficiency of the previous owner and they were not successful and now the bank has taken ownership of the property. This is what most people are referring to as foreclosed properties but they are really REO bank owned properties. When a buyer buys one of these homes, the buyer is provided clean title if a proper title search is completed and the bank is required to satisfy back taxes, liens and encumberences depending on the purchase agreement and addendums written for the purchase. Again, a Realtor should be able to help a buyer through a contract and if there are legal questions then the buyer should consult a lawyer.

So that is the difference between a short sale, foreclosure property and a Bank Owned REO property. If you are still unsure, dont hesitate to ask questions. I am SFR certified by the National Association of Realtors and I can answer your questions based on Florida practices. Good luck on buying your home.