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Sacramento Short Sale vs. REO:  What’s The Difference?

Sacramento Short Sale vs. REO:  What’s The Difference?


As a Sacramento Realtor, I am often asked, “What’s the difference between a Short Sale, and a REO?” The question stems from the majority of the inventory in Sacramento’s real estate landscape. I am one of those crazy folks who love stats, so I’ll try to keep this short…of the 3,268 Sacramento Area single family homes for sale, in November, 52% of them were Short Sales, or REO’s. When you breakdown Sacramento Short Sales vs. REO’s, Short Sales make up 67% of the inventory, which is a huge shift from last year (2008) at this time, when REO’s made up 67% of Sacramento’s distressed, single family, real estate market.

So, what’s the difference between a Short Sale, and a REO?

Short Sale listings, typically, still belong to an individual owner, who through some sort of hardship, cannot afford to make the payment anymore. The reason they are considered Short Sales, is the loan balance(s) equals more than the home’s current value. The owner must list the home with a Sacramento Short Sale Agent, obtain an offer(s), and prepare what’s called a “Hardship Package” (detailed list of expenses, letter detailing the hardship, and income documentation), which the agent will submit to the lender(s) to be approved. This initial portion of the transaction can take days, but the short sale approval can take months, as most banks do not have a solid Short Sale process in place. Buyers and Sellers must have a tremendous amount of patience in a Short Sale transaction. A solid Sacramento Short Sale Agent can make an incredible difference!

REO listings, also called Bank Owned, are properties that have gone through the foreclosure process, and made their way back to the bank. The banks hire Realtors to list REO properties, who then obtain the “highest and best” offer for the bank to review and approve. A Sacramento REO Buyer Agent, must take the time to educate clients on these transactions. Sacramento Area REO’s, in certain price points, are receiving multiple offers, as First Time Home Buyers flood the market, and listed inventory continues to diminish. Additionally, the banks do not have prior knowledge of the property, and typically sell the property in its “as is” condition. A Buyer cannot expect the bank to pay for any inspections, repairs, or warranties, and the bank will “encourage” the Buyer to move quickly with shortened inspection periods, and a per diem cost for every day the transaction extends through the close of escrow. Having the right Sacramento REO Buyer Agent can be critical to obtaining the right property, and closing on time!

If you find yourself wanting, or needing, to explore the Sacramento Area Real Estate Market, give me a buzz, (916)214-2082, and I’ll be happy to work with you!

All the best,

Kyle Groves