What is the difference between REO, Foreclosure, Short Sale homes?
My wife and I are preparing to purchase our first home using an FHA loan with assistance from her CalPERS retirement savings. We have decided to purchase a home we can afford on only one income so we don't have to worry about the recession and losing a job. By herself she qualifies for $350k and we have plenty of homes in our area for under $350k. I would like someone to explain to me what the major differences are between REO homes, Short Sale homes, Foreclosure homes. Which one is the best deal usually and which one should we look into buying? We want something that is clean and ready to move into with little or no work needed. Also, which one of the three is more likely to cover the closing costs??? We keep hearing about how sellers are paying closing costs most of the time in this housing market. I want to get a great deal and avoid paying 100% of the closing costs if we can. Thank you
Public Comments
- REO's and Foreclosures are the same. Both are already owned by the bank. Short sales are when the owner is trying to sell for less than they owe on the house. Their lender must agree to accept less than the amount owed. Many foreclosre/REO homes are trashed because the former owners are immature and mad at the bank and take it out on the home. Mature people realize they had a deal and if they can't hold their end of the deal, than the bank is only doing its job when it forecloses. I don't believe you can use funds from CalPERS for anything besides a CalPERS loan. FHA loans are different than CalPERS. FHA loans require 3.5% down. If your agent structures the loan offer correctly, you should be able to get the seller to pay most or all of your closing costs. Don't try to save on the price of the home by offering alot less than the asking price. Pay closer to the real price they want, and let them pay the closing cost up to 6%. Getting a lower rate on your loan will save you much more in the long term than cutting $5k to $10k on your purchase price. Good luck and happy home owning!
