Commonly used Terms in Real Estate

Terms like short sale, foreclosure, and REO are commonly used in real estate that are unknown to an average buyer or seller but it is important to know the meaning of these terms.

Short Sale

Short Sale is a method to avoid foreclosures. When a seller is no longer able to make their mortgage payment and owes more on their home loan than what the home is worth in the current market. The seller then arranges with their mortgage lender to accept a price that's less than the amount they owe on the property. As part of this bargain, the lender typically agrees to forgive the rest of the loan. The buyer picks up a property at a discount, and the lender avoids taking on the burden of unloading the property.

Foreclosure

 Foreclosure is a legal process initiated by a lender if other options such as short sale are not considered by the seller. In this situation the home owner fails to make minimum payments/interests on his/her mortgage for a sufficient amount of time so the lender, be it a bank, building society, REO seizes and sells the property as their own. The home owner is not a stakeholder in the sale. 

Commonly used Terms in Real Estate

REO

REO is an acronym for Real Estate Owned property. After foreclosure the property is being put for sale up in auction. But if the property is not bided on it becomes the property of bank and is called as REO.  Real estate investors frequently go after these properties because the house can be bought at a discount to its market value.