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As a Certified Distressed Property Expert (CDPE), we have handled both Short Sales and Foreclosed (REO – Real Estate Owned by lenders) properties. A common misconception is that these properties can’t be found on the MLS. Not true! Foreclosed properties are listed on the MLS - and OUR website, which is always up to date with the latest info from the MLS. 

So, what IS a Foreclosed property? Let’s break it down, step by step! 

FORECLOSURE PROCESS

When an owner makes partial payments or no payments for 120 days the lender can send a Lis Pendens Notice of Foreclosure.

SHORT SALE

If the owner takes action and responds by putting the property up for sale, registering the appropriate paperwork in court, usually within 30 days of the receipt of the Lis Pendens, they can do a Short Sale (selling the property for less than the money owed to the bank) or a regular sale (if there is equity in the property).

Short Sales should be handled by specialized real estate agents who have the knowledge and experience to work with asset managers hired by the lender to process this type of sale.  Short sales are listed on the MLS like other properties and will have a notation that a short sale process must happen.  If you need to close in a certain timeline as a buyer, this type of sale is not for you. “Short sales” are not short, timewise, and require a lot of paperwork from the owner.  Short sales are still in foreclosure and the foreclosure process moves forward during the short sale time frame. 

IN FORECLOSURE

If the owner does not respond to the Lis Pendens, then the foreclosure process will commence.  During this time the owner will have fees assessed, opportunities to cure, etc. This process may take anywhere between 3 months to a year or more if there are additional liens on the property.  

Finally, the property is put up for Sheriff’s auction after many notices in the newspaper, etc. Most of the time the actual lender/bank buys the property back at the Sheriff's auction.  Do not try to do this yourself as there may be additional liens, taxes, fees, etc.  on the property that you will be held responsible for

FORECLOSED PROPERTY

The lender then has their REO (Real Estate Owned by lender) Department place them with Asset Management companies that handle the sale and list the properties with the assistance of Real Estate companies and agents who have contracts to perform these sales on behalf of the asset company.  Once the property is prepared, it is listed on the MLS.  The properties often must be cleaned out, some repairs may be made (but not always), and the property is sold “As-Is, Where-Is, with no warranties” and there is an exceptionally long Foreclosure/REO addendum added to the offer to purchase. They are completely in favor of the asset company/lender. 

On the MLS, these properties will have a notation that the property is REO or Corporate owned. There are some that go to auction sites, but most auction sites still list on the MLS, too. 

So, are these properties a deal or not?  Just like anything else, you get what you pay for. Many past owners did not have the funds to maintain their property and sometimes they damage the property, once they know they’re going to lose it.  Some owners abandon the property, and it falls into disrepair.  

Buyer beware!  And work with a knowledgeable experienced Real Estate agent to help you purchase these types of properties. If you or someone you know is in one of these situations, please have them give us a call and we will be happy to assist them.