You hear the phrases in the news daily right now: distressed properties, foreclosures, REO, etc. But do you know what they mean? If you are a real estate professional, are you using the “lingo” correctly? An experienced Realtor can take the stress out of distressed property transactions by knowing the systems that work, but everyone can benefit from knowing the basics.
A compilation of user-friendly definitions that can help you navigate the process:
Short Sale is when a homeowner and mortgage lender agree to sell a home for less than the amount owed on the home. Mortgage lenders usually require evidence of hardship before approving a short sale.
Pre-Foreclosure means the homeowner has received notification that they are not making adequate payments and the mortgage lender is beginning the steps necessary to foreclose on the home.
Foreclosure is the legal process by which a borrower who has not made adequate payments is deprived of their ownership interest in the property.
Real estate owned (or REO) is a real estate asset owned by the lender that has been taken back during the foreclosure process.
A servicing agent is hired by the lender to service the loan or is an investor, such as a private investor or government-sponsored enterprise, like Fannie Mae or Freddie Mac. They are often subject to guidelines. (You can?t always find out who the investor of the loan is.)
Portfolio loan is an asset owned and controlled by the lender. The decision maker on the loan is in-house. A portfolio loan can be easier to navigate in a short sale process because a servicing agent may have limited authority. This is a great question to ask up front to set realistic expectations for the transaction.