What is a Short Sale?
A short sale is when a home is being sold at a purchase price that is less than the current remaining balance. It is known as “a debt forgiveness granted to a homeowner by a lender.” Within a short sale, the lender agrees to accept less than the total owed in exchange for a release of the mortgage as a lien on the property.
What is a Foreclosure?
A foreclosure is the legal process in which the lender tries to reclaim the title of a property due to failed mortgage payments by a homeowner. The owner forfeits all rights to the property.
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 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 owed 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.