A short sale is the sale of a home in which the proceeds from the sale are not sufficient to pay off the existing loan(s) but the lender(s) accept(s) the discounted amount to fully satisfy the loan(s).
A foreclosure is the process a home goes through when a lender attempts to recover the balance of a loan from a borrower who has stopped making payments.
Once a home has been foreclosed on by the bank, it becomes an “REO” or real estate owned property that is sold by the bank.
Orange County has hundreds of Short Sale and REO (also known as “Real Estate Owned” or “Bank Owned”) listings on the market at any given time. These range from condos to starter home, to custom estates priced well into the millions. Short Sales and REO’s have been in all neighborhoods including Aliso Viejo, Laguna Niguel, Ladera Ranch, Irvine, Newport Beach and more. Newer residential developments such as Talega in San Clemente and Ladera Ranch may have a higher percentage of distressed sales.
REO and Short Sale homes are commonly lumped together because they relate to foreclosures, but they are quite distinct from one another. Short sales happen before a property goes to foreclosure, while REO/Bank Owned properties are sold after the home is foreclosed and the bank or lender takes control of the property. Short Sales also typically involve the homeowner and/or their agent getting lender approval to sell below what is owned to the bank(s), while REO sales are usually direct negotiations with the lender and the real estate agent for the investor or potential buyer.