Here are some basic definitions of the terminology that you’ll see when dealing with foreclosed homes in Acworth Ga, real estate agents, foreclosure attorneys, trustees, banks and so on.
Foreclosure: A foreclosure is a legal process whereby a creditor repossesses collateral for a loan that’s in default. In most cases, that means the bank or mortgage lender repossesses a house so that they can resell it to satisfy the debt.
Usually, they put the home up on auction, with a minimum or reserve bid equal to the amount of money they need to clear their debt and associated fees. This amount tends to be below market value, which is why you have the opportunity to get a good deal. However, the property is usually sold “as is” (and in most cases, buyers are unable to inspect the inside of the property).
This sale is referred to as the foreclosure auction.
Pre-foreclosure: This is the period before the property goes on sale at the foreclosure auction. The pre-foreclosure period allows time for you to research the property and possibly contact the homeowners with a deal.
For the homeowners, it’s also the period of time where they may be able to save their home from foreclosure, provided they can satisfy the debt and all fees. This period of time happens before the foreclosure auction and is referred to as the reinstatement period.
Redemption Period: In some states, there is a redemption period lasting from a few weeks to several months after the sale of a home at a foreclosure auction. If the original homeowner can satisfy the debt during this period, then they can reclaim (redeem) the property.
Real Estate Owned (REO): If no one bids the minimum amount at a foreclosure auction, then the bank owns the property. This property is listed as REO in their records. Since a bank is in the business of loaning money not holding onto real estate, the bank will try to move this property off their books.
Buying REO property tends to be a safer transaction (as opposed to buying at a foreclosure auction), since the bank often – but not always – makes repairs and ensures they give you a clear title. If that happens, then you can expect to pay more for the property to cover those additional expenses. Otherwise, if the bank doesn’t do these things, then you can usually buy the property for less than the opening bid at the original foreclosure auction.
Short Sale: A short sale occurs when the bank or other lender agrees to take less than the total amount owed on the loan to satisfy that debt.
One of the reasons a lender would agree to this is to avoid a foreclosure. Obviously, a short sale helps the borrower since they can avoid losing their home and further damaging their credit. But in some cases, it makes sense for the bank as well, since they won’t have to put the time and money into going through the foreclosure process.
Distressed Property: This refers to any real estate property that’s at risk of foreclosure or perhaps already in foreclosure.