Short Sale Versus REO? What does it all mean?

Well we have been working with many clients lately that have been interested in Short Sales or REO’s.  I’d like to explain the difference as most people coming to us don’t really understand exactly what each is.

A short sale is a property that is being sold “SHORT” of the amount owed on it.  This means that if you submit an offer on a home that is a short sale the seller (owner) would approve the offer and then send it to the bank that they have their loan through for final approval.  The bank has the ultimate authority for approval and if they don’t approve the offer amount and counter offers are not successful then if no other offers are successful the home would be sold back to the bank after the Notice of Default for non-payment is made and a sale date is created at the courthouse steps.  Remember, if you are writing an offer on a short sale the approval time can be VERY lengthy.  By this I mean that we have had some short sales that were not approved for 4 months.  What we generally would do is submit the offer and continue to look at all new listings that come onto the market in case something better comes along for our clients. 

An REO (bank owned, foreclosure) is “Real estate owned” by the bank.  This means a notice of default was filed when the owner stopped making payments.  After a specified time a sale date was created and the home was sold back to the bank at the courthouse steps.  The bank then has complete possession of the property and vacates the previous owner (if needed) and turns the listing over to a real estate agent to list.  Banks generally have a fairly quick response time (1 day to 8 days usually in our area) and are usually listing their homes near or at fair market value.  We’ve found that new listings aren’t usually too open for negotiation but around the 30 day mark the banks usually negotiate more (but there are ALWAYS exceptions to this). 

So, if you are thinking of purchasing a short sale or REO home we’d love the opportunity to assist you!  Just call us at 530.227.0345 or visit our website at

You can always search the entire MLS at


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